Drewry Maritime Research’s latest Tanker Forecaster report looks at how surplus tonnage is placing a burden on crude tanker freight rates in the short and medium term, however, product tankers especially MR tankers, are expected to perform better in the coming years.
Freight rates for MR product carriers improved in the last quarter of 2011 owing to an increase in chartering activity across major trade routes in this segment. Overall, reported spot chartering activity increased by 18% in 4Q11. Considerable improvement was observed on the Mediterranean region where the activity increased by 49% over the quarter followed by the North West Europe (26%) and Singapore (17%).
Of the vessels which operate in the product fleet, the MR tankers stand out as having the greatest earnings potential in the long term. Drewry Maritime Research expects that the fleet growth is likely to be restricted on account of low ordering in this segment. In the short term, a marginal improvement in the Atlantic trade is anticipated, although downside risks include the closure of several refineries in the US Gulf due to a lack of cash flow and the Eurozone debt crisis. However, the demand for MR tankers is likely to grow steadily in Asia and Middle East regions with upcoming refinery capacity additions.
But the key for this potential rise in rates is the demand supply gap, which will work in favour of owners to a considerable extent. The supply of MR tankers declined marginally by the end of 2011 to 23.5 million dwt. Further, with the MR orderbook equating to 8.5% of the fleet, Drewry forecasts a supply demand balance of 2.3 million dwt (or 9.8% of supply) for 2012. However, it is the reduction of this balance to 0.5 million dwt (or 2.1% of supply) come 2016 that will push rates upwards.
This demand supply balance should be looked on enviously by others in the shipping world, none more so than the container sector as these figures showcase the positive affects a well-managed supply of tonnage can have on rates.
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World Maritime News Staff, February 16, 2012; Image: Aker Philadelphia