• 2017 September 5

    Tanker market touches the bottom

    Freight rates are stagnant for the second year in a row following their high level of 2015. The trends prevailing in the market show the growth of global tonnage exceeding moderate increase of demand for oil transportation. Among the key negative factors is oil output reduction implemented by OPEC members and non-OPEC nations. Almost all oil is exported from OPEC countries by sea. Therefore, changing volume of shipment influences the demand for tanker transportation more than oil prices.

    Tanker market spot rates have been decreasing in all segments from 2015. Spot rates in the segment of Aframax tankers in the first half of 2017 fell by 45%, year-on-year, in the segment of Suezmax tankers – by 50%, in the segment of Medium Range and Handysize tankers – by about 28%. In 2017, the fall against the year of 2015 is 65%, 70% and 60% accordingly. 

    According to Clarksons Research, tanker market has weakened considerably during the first six months of the year. In the segment of Very Large Crude Carriers (VLCC), it fell to 15,330 $ per day, down 63% against average figures of 2016. Spot rates in the segment of tankers Aframax have shown a considerable decrease from the beginning of 2017. Average revenues in June fell to 10,481 $ per day, which is less than a half of the average Aframax revenues in January. 

    The fall of freight rates had an impact on the financial results of most global shipping companies in the second quarter and in the first half of 2017. According to Lloyd's List, MAERSK Tankers reported a $483 million loss in the second quarter of 2017, as falling charter rates topped off a $464 million impairment to the value of its fleet. The underlying loss at Maersk Tankers in April-June was $17 million compared to a $26 million profit in the same period. Consolidated adjusted net loss of Teekay Corp. (Canada) in the second quarter of 2017 was $38.1 m compared to $701,000 profit in the same period of 2016. Gener8 Maritime Inc. (USA) finished the second quarter of this year with a net loss of USD 82.5 million, compared to a net income of USD 38 million posted in the same period a year earlier.

    Despite the improvements forecasted by International Energy Agency (IEA) and other agencies, it cannot be said safely that the markets will recover in the nearest future. Downward trend is still prevailing, the policy of OPEC countries is consistent. 

    Clarksons Research forecasts the market of crude shipments to grow a little in 2017. It should be attributed primarily to reduced oil output in large oil-producing countries. Amid this situation, it is expected that oil exports from the Middle East will decrease, especially from Saudi Arabia, the key oil producer. Almost all those volumes are transported by sea. However, there are possibilities to increase the demand for tanker transportation, driven particularly by the demand from China and India as well as growing exports from the USA.

    Sophia Vinarova