Tanker Market Looks for More Balance Down The Line
The tanker market’s balance of demand and supply could be headed towards a more sustainable future down the line. In its latest weekly report, shipbroker Allied said that “the tanker market has been in a state of despair since the pandemic brought an almost complete collapse of global demand for crude oil. While other major bulk commodities have since shown a remarkable recovery path in the demand levels, including energy commodities such as coal and natural gas, crude oil continues to lag behind finding it difficult to place any firm foothold on market support for higher crude oil consumption. For many years now fossil fuels have been battling the increased surge in market share gained by renewable sources of energy as well as a continual push by regulators for lower emissions and better energy efficiency”.
According to Allied’s Head of Research & Valuations, Mr. George Lazaridis, “all this has come to create what seems to be a much longer “storm” in the market than anticipated. With disruptions in global movements and transportation keeping a presence to some degree or another, as part of the ongoing battle against the pandemic, a fair share of global consumption has remained elusive from this market. All this has led to a tanker market that has been unable to match its supply/demand balance properly, keeping freight rates at historical lows for close to 2 years now. Yet there seems to be signs of better days on the horizon”.
Mr. Lazaridis added that “the poor freight market conditions have helped contribute to a balance being found down the line. The increased pressure brought on cash flows for most owners has helped push for a steady stream of tonnage being retired and sent to be beached throughout most of 2020 and 2021. At the same time, we have seen little to almost no activity in terms of new newbuilding orders being placed throughout this period. Yet this has been of little consolation as of now since most of the deliveries seen have been older orders and as such, and despite the fair number of demolition sales, the fleet has continued to grow steadily against a backdrop of week trade demand.
“While demand looks to be more promising now for the forward period, the recent spike in crude oil prices could further dampen things keeping consumption capped. With the pandemic restrictions however now looking to be slowly retracted across most of the globe and the severity and fears of COVID-19 easing amongst most, the expectation is for the summer period bringing us a considerable step closer to the “normality” of 2019. It will take a fair bit longer before the considerable gap between supply and demand closes, especially when considering the number of deliveries scheduled for this year and next, yet a strong positive momentum could help things gradually move back to more sustainable levels by the end of the year”, Allied’s analyst concluded.
Source : Nikos Roussanoglou, Hellenic Shipping News Worldwide