The 12 months 2021 has been robust on crude oil tanker freight charges throughout the board thus far. Consequently, the trade buzz has been all about giant scale scrapping of tankers, however thus far, it has been all discuss and little or no stroll, because the second-hand market has proved a much-preferred different.
Though demolitions are up from the beginning of final 12 months, solely two shuttle tankers and two Aframax crude oil carriers (0.45m DWT) have been confirmed demolished within the first two months of 2021, in accordance with information from Clarksons. That is considerably down from the 1.1m DWT of crude oil tanker capability that left the market in December 2020.
“Regardless of the extensively disappointing crude oil tanker freight charges at first of 2021, house owners look like in no hurry to cut back the cargo carrying capability out there by promoting ships for demolition.
The attractiveness of scrap metal costs round USD 450 per ltd. provided by breaker yard on the Indian sub-continent, simply vanish when in comparison with USD 24.5 million being paid for a 2002-built VLCC within the second-hand market,” says BIMCO’s Chief Transport Analyst, Peter Sand.
Why is extra capability not immediately eliminated?
“Typically, demolition volumes rise when freight charges fall, however it’s not at all times that easy. Earnings should stay within the doldrums for an prolonged interval earlier than demolition exercise picks up considerably,” says Sand.
As an example, in This autumn 2014 via Q1 2016, tanker freight charges loved excessive ranges on the again of a pointy decline in oil costs throughout This autumn 2014 to Q1 2015, however when tanker freight charges began to drop after Q1 2016, it took round 5 quarters for scrapping exercise to select up in July 2017.
Identical-same however completely different
Each disaster holds components of one thing that we’ve got seen earlier than, along with components which are new to us. Probably the most hanging recognisable aspect of the present disaster is that some huge cash was made earlier than all of it went bitter, whereas essentially the most hanging new aspect appears to be the truth that demand may be very completely different.
We at the moment observe two opposing future developments, each of which can steadily affect tanker commerce lanes. The place non-OECD nations (primarily India, China and South East Asia) are quickly heading in direction of a pre-pandemic stage of oil demand, OECD nations alternatively are on a really completely different observe because the US is now becoming a member of Europe and Japan on a pattern of a decline within the demand for oil.
Coming into the seasonal lows for the 12 months
2021 will not be about seasons in any respect; leaving the winter peak season behind us now, we are able to solely look again at it as a non-event. The Asian refinery upkeep season is at the moment beneath approach, however it’ll most probably turn out to be one other common aspect which can solely be observed to a small extent this 12 months.
Supply: BIMCO
