Friday, January 27, 2017

Rate drop forecast across all tanker types

Crude and residual fuel tonne/mile demand is projected to increase by about 0.7% on an annual basis from 2017-2021, claimed a new report. 
According to McQuilling Services’ 20th ‘2017-2021 Tanker Market Outlook’, this year, demand growth is expected to be 0.3% amid lower oil output from participants in the OPEC and non-OPEC production cut agreement and a pick-up in global inventory draws. 

Meanwhile, clean product tonne/mile demand is expected to see a marginal increase of 0.22% in 2017. 

On the basis of supply side risks, McQuilling forecast that 2017 will see a drop in rates for all tanker classes with VLCCs averaging around $27,000 per day and about $12,500 per day for MR2s on a triangulated basis. 

However, earnings in 2018 are expected to improve slightly across all tanker segments, given a decelerating supply outlook and increasing oil supply, the report said.

MR earnings on a round-trip basis are expected to be mixed with TC2 TCEs averaging $8,400 per day this year, while the USG/Carib round trip voyage is estimate at $12,400 per day. TC14 earnings are forecast to be the lowest of the trades tracked at $4,300 per day; however, on the triangulated basis (TC2/TC14) owners will earn around $12,400/day in 2017, increasing to $14,200 per day by 2019.

The relationship between timecharter rates and spot market earnings was strong in the analysis and formed the foundation for the timecharter forecasts, the consultancy explained. For VLCCs, one-year and three-year timecharter rates are expected to average $30,000 and $32,000 per day in 2017, respectively. 

McQuilling’s 2017 price forecast for the five-year old crude tanker sectors saw VLCC values averaging $59 mill, a 14% decrease from the 2016 average price of $68.8 mill and a 1.6% decrease from current levels. Modern Suezmax tankers are projected to demand $38 mill this year; however, by 2021 the values of these tankers were forecast to reach $51 mill amid a pickup in earnings. Panamax values are likely to fall to $20 mill in 2017, with further contraction expected to 2021.

Clean tankers in this age group are expected to see lower prices relative to their 2016 averages. For LR2s, McQuilling forecast a 2017 average price of $30.5 mill, a 33% decrease from the average price recorded in 2016, while the LR1 sector is expected to decline by a more modest 20% to $25.9 mill. MR2s are likely to depreciate by 21.8% to $20.5 mill; however, a recovery to 2016 levels is expected to occur in the medium term.

In the ‘2017-2021 Tanker Market Outlook’ McQuilling said it had incorporated a variety of new features to provide clients with a more robust view of global trade flows and major tanker trades:
§  Incorporated the use of ‘big data’ by using remotely sensed vessel position data to track real-time demand, fleet deployment and utilisation across the various tanker sectors.

§  Expanded the five-year forecast for freight rates and TCEs by one additional trade (USG/Carib) for MRs (38,000 tonne cargo), totalling 19.

§ Increased the capture and scrutiny of non-OECD country bilateral trade through continued collaboration with clients and other parties, as well as the use of industry datasets, enabling 95% plus coverage of global trade flows.

§ Developed bunker price forecasts on a regional basis to provide clients with the most accurate trade-specific TCE earnings.

§ Through the use of enhanced database techniques, data distillation processes for tanker supply and demand development has been streamlined, reducing manual interventions and data inconsistencies and thereby increasing data integrity.

This 200-page report provides a five-year spot and TCE outlook for eight vessel classes across 19 benchmark tanker trades, plus two triangulated trades. Also included in the report is a robust five-year asset price outlook as well as a one and three-year timecharter forecast through 2021. 

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