Tanker ordering has picked up this year, however it seems that supply will remain low, compared to demand.  In its latest weekly report, shipbroker Gibson said that “2023 has seen a notable increase in new tanker ordering activity and as the year slowly draws to its end, it is perhaps time to reflect on where investment in new tonnage has been the strongest and where it is still lacking”.

According to Gibson, “for the year to date, ordering activity has been the strongest in the Aframax/LR2 segment, with the focus largely on coated tonnage.  Here, circa 80 fresh orders have been placed, with the attractiveness of this asset class being fuelled by very robust spot tanker earnings, particularly in the Aframax segment.  Aframax spot TCE earnings outperformed larger crude tanker categories both in 2022 and so far in 2023, driven by significant structural increases in tanker tonne miles amid Russian sanctions and a significant portion of ageing tonnage migrating into solely Russian trade.  A degree of confidence in this size group has also been offered by the fact that close to 440 vessels in the existing Aframax/LR2 fleet are 15 years or older.  With so many ageing tankers in this size, the volume of ordering activity to date is certainly looking modest in comparison”.

The shipbroker added that “investment has also been robust in the Handy/MR and Suezmax categories.  For the Handy/MRs, orders for tankers between 42 to 57,000 dwt (MRs) have amounted to just over 90 units to date, whilst we have also seen a modest (yet very rare in recent years!) re-emergence in orders for 30 to 42,000 dwt (Handy) tankers, with 16 orders placed.  Yet again, whilst investment in this size group is already at its highest level in a decade, this has to be considered in the context of the ageing fleet, where we count just over 940 units built in 2008 or earlier and 288 tankers built in 2002 or earlier.  The picture is somewhat more balanced for Suezmaxes, where ordering activity to date stands at 55 vessels, which compares to 204 units at 15+ years of age”.

Meanwhile, “for the LR1/Panamaxes and VLCCs, where investment in new tankers has been restricted, the gap between orders and ageing tankers is even more stark.  For the year to date, 20 confirmed LR1 orders have been placed (and no Panamax orders).  Whilst these orders mark the first investment in this size group since 2018, these numbers are far too insufficient to offset 245 tankers in this segment aged at 15+.  Despite the larger fleet size, VLCC orders for the year to date also stand at just 20 units, whilst 264 tankers in this category are at 15 years of age or older.  However, it is worth bearing in mind that VLCCs (and Suezmaxes to an extent) have the largest share of tankers already absent from the mainstream market, with many units either trading sanctioned barrels (Iranian or Venezuelan crude before temporary sanctions relief) or are engaging in permanent storage”, Gibson noted.

“The trend is similar if we consider total tanker orderbook vs. the fleet at 15+ years of age shown on the chart below, which clearly shows that whilst increases in ordering activity are welcome, it comes nowhere close to offsetting the growing mountain of ageing tonnage.  This has not been a problem recently, however, due to a rapid pull of ageing tankers into Russian and sanctioned trades.  Nonetheless, this alternative demand cannot continue growing forever and will be saturated at some point.  When that happens, the normal drivers of tanker demolition will return, being reinforced by ever increasing regulatory pressure.  Yet, if demand remains there, it may prove more economical for owners to upgrade their existing tonnage rather than invest into new tonnage”, the shipbroker concluded.

China remains the biggest importer of crude oil in the world, marginally ahead of the E.U. In its latest weekly report, shipbroker Banchero Costa said that “China’s crude oil imports so far has been another positive period for crude oil trade, despite the high oil prices and risks of economic recession.  In Jan-Sep 2023, global crude oil loadings went up +6.7% y-o-y to 1620.3 mln tonnes, excluding all cabotage trade, according to vessels tracking data from Refinitiv.  This was well above the 1518.4 mln tonnes in Jan-Sep 2022 and the 1393.2 mln tonnes of Jan-Sep 2021, but also slightly above the 1564.9 mln t in the same period of 2020.  Exports from the Arabian Gulf were down by -0.3% y-o-y to 651.3 mln t in Jan-Sep 2023, and accounted for 40.2% of global seaborne trade.  Exports from Russia instead increased by +5.6% y-o-y to 173.3 mln tonnes, or 10.7% of global trade.  From the USA, exports surged by +20.8% y-o-y to 144.3 mln t. From West Africa, exports increased by +1.3% y-o-y to 129.9 mln t. From South America, exports surged by +22.2% y-o-y to 116.2 mln tonnes in Jan-Sep 2023”.

According to Banchero Costa, “in terms of demand, seaborne imports into the European Union (27) increased by +4.2% y-o-y to 352.7 mln t in Jan-Sep 2023, with the EU accounting for 21.7% of global seaborne crude oil imports.  Imports to India increased by +2.0% y-o-y to 171.4 mln t, accounting for 10.5% of global trade.  Mainland China is right now the largest importer of crude oil in the world, with a 23.7% share, once again marginally ahead of the European Union’s 21.7% share.  In Jan-Dec 2022, China imported 439.2 mln tonnes of crude oil by sea, excluding cabotage, according to Refinitiv vessel tracking data.  This represented a contraction of -2.5% y-o-y compared to the 450.2 mln tonnes imported in 2021.  It was also -9.6% down from the alltime high of 485.9 mln tonnes imported in 2020, when the country took advantage of low crude prices and low demand from Europe”.

The shipbroker added that “in the last two years, however, China’s annual crude oil imports slid, dropping for the first time in several years, as Beijing clamped down on refining sector to curb excess domestic fuel production while refiners drew down massive inventories, and Covid lockdowns led to a reduction in demand.  In the first 9 month of 2023, imports into China rebounded strongly by +22.7% y-o-y to 384.6 mln tonnes, which was actually even higher than the record 370.4 mln t in the same period of 2020.  About 31 percent of volumes discharged in China in Jan-Sep 2023 were carried in VLCCs, about 23 percent were carried in Suezmaxes, and about 32 percent in Aframaxes.

Main crude oil import terminals in China are: Ningbo/Zhoushan (51.5 mln tonnes in Jan-Sep 2023), Lanshan (37.8 mln t), Dongjiakou (37.2), Dalian (26.8), Qingdao (26.7), Zhanjiang (22.5), Tianjin (19.3), Quanzhou (18.5), Huizhou (17.0), Yantai (16.9), Cezi (12.7), Beilun (11.3), Caofeidian (10.7), Jieyang (10.6).  In terms of sources of the shipments, the majority of China’s oil imports arrives from the Middle East.  Saudi Arabia is the single largest exporter to China, accounting for 15.6% of volumes in Jan-Sep 2023.  In Jan-Sep 2023, China imported 59.8 mln tonnes of crude oil from Saudi Arabia, up +5.1% y-o-y.  In the same period, imports from Iraq to China increased by +13.5% yo-y to 41.6 mln t, and from the UAE by +30.0% y-o-y to 28.9 mln t. Volumes from Oman increased by +15.5% y-o-y to 29.8 mln t, whilst from Kuwait declined by -21.6% y-oy at 16.8 mln t. Direct shipments from Russia increased by +33.6% y-o-y to 41.5 mln t in Jan-Sep 2023.  Nevertheless, Russia still accounts for less than 11 percent of China’s overall seaborne crude oil imports.  Imports from ASEAN increased by +57.7% y-o-y to 37.6 mln t in Jan-Sep 2023, and from South America by 70.5% y-o-y to 32.1 mln t”, the shipbroker concluded.

The ship recycling activity has fallen by almost 14% so far this year, according to data from Xclusiv Shipbrokers. This, despite the fact that prices haven’t fallen that much in Southeast Asia. In its latest weekly report, the shipbroker said that “despite the fact that the demolition market is at almost similar levels as one year ago, with prices in India, Pakistan and Bangladesh being 7%, 10% and 2% down, while in Turkey being roughly 30% up, we have witnessed a significant drop in the total demolition volume compared to previous years. As of 18th August 2023, the number of Tanker, Bulk carrier, Container and Gas vessels that have gone for scrap is 129 ships, almost 14% down compared to the same period of 2022 and the lowest number of at least the past 5-year period. Although Bulk carrier and Container segments witnessed a significant increase in number of vessels sold for recycling, the Tanker market volume of scrap is at its lowest since at least 2018. The increase in number of Container and Bulk carrier vessels that went for scrap is in line with the consideration of the freight rates reduction in both markets, which inevitably have pushed owners to scrap their older units”.

“More specifically, so far this year, a total of 55 Bulk Carrier vessels with an average age of 30 years were sold for demolition, almost double compared to the same period of 2022. The Panamax and Handymax segments have driven the bulk carrier demolition activity, as 13 Panamax and 19 Handymax vessels have been demolished since the beginning of 2023 (PMX and HMAX consist of almost 24% and 35% of total bulk carrier demolitions respectively). The average of 10 TC routes for Supramax and 7 TC routes for Handysize have suffered a major decline compared to a year ago, having both lost almost 50%, while the average of 5 TC routes for Panamax is down 12% y-o-y. In contrast, the average of Capesize 5 TC routes has increased by 84% y-o-y and as a result a mere 5 vessels went to scrapyards (9% out of total bulk carrier demo sales) with last Cape reported sold for demo back in mid-April 2023. The majority of dry bulk ships went for scrap in Bangladesh representing almost 80% of total bulk carrier sales. On the Container market, a total of 41 vessels with an average age of 29 years went to scrapyards, a significant rise compared to 2022’s same period demo sales, when only 2 Container vessels were demolished between January and 18th August of 2022. We have observed that the FBX has lost almost 74% on a yearly basis and closed the week at 1,522 points. Most of Containerships went for scrap in India taking 44% of total Container demolitions, followed by Bangladesh that attracted about 37% of total Container scrap sales”, Xclusiv said.

On the other hand, according to the shipbroker, “the tanker’s high freight rates driven by Russian’s invasion of Ukraine as well as the western sanctions in combination with the low orderbook maintained the utilization/service of ageing tankers. Since the start of the year, 21 tankers with an average age of 32 years have been sold for recycling, with the majority of them being products and Small/ Chemical tankers. 15 tankers with DWT below or equal to 10,000 have been demolished representing 71% out of total tanker demo sales. This compares to 113 tankers went to scrapyards during the same period of 2022. Interestingly that as of 18th August, we have not seen any Panamax/LR1, Aframax/LR2, Suezmax and VLCC vessels that have gone for recycling, while only 4 MR2’s and 2 MR1’s were sold for demo. Last but not least, the Gas market’s demo sales are almost at the same levels compared to one year ago. From January till 18th August 2023 a total of 12 gas carrier vessels went to scrapyards with an average of 34 years. This compares to 9 gas carrier vessels which were demolished during the same period of 2022”, Xclusiv noted.

The shipbroker concluded that “optimism may come from the reopening of the Pakistan demo market, following China’s and IMF financial support. Cash Buyers and Gadani Recyclers relaxation in opening and clearing L/Cs & various other payment issues and the shortage of scrap together with improving domestic market sentiment will start lifting imported scrap in Pakistan. This may establish more lucrative demolition options as Pakistan, one of the major demolition destinations has been out of action for a prolonged period. One should point here that recyclers in Bangladesh, since late July 2023 are refraining from offering on ships greater than 8-9,000 LDT, due to inability to secure support from Banks for opening new L/C’s, and this is another drawback for the demolition market”.

Source: Hellenic Shipping News Worldwide

The tanker market has experienced significant downward pressure so far in 2023, but this hasn’t affected ship prices as much.  In its latest weekly report, shipbroker Xclusiv said that “one of the most discussed EU measures against Russia is the sanction of Crude oil and products along with the price cap. In June 2022, the EU adopted a sixth package of sanctions that, among others, prohibits the purchase, import or transfer of seaborne crude oil and certain petroleum products from Russia to the EU.  The restrictions apply from 5th December 2022 for crude oil and from 5th February 2023 for other refined petroleum products.  Along with that, the EU decided that European vessels will be able to transport Russian crude oil and products from Russia to other destinations (third countries, except for EU) only if the crude oil/product is bought below a certain price cap (USD 60 per barrel for crude/ USD 45 per barrel for discounted petroleum products/ USD 100 per barrel for premium petroleum products).  This decision was taken in order to limit price surges driven by extraordinary market conditions, and drastically reduce the revenues Russia has been earning from oil since it unleashed its illegal war of aggression against Ukraine and to stabilise global energy prices”.

According to Xclusiv, “until now the price cap was not a big deal for owners and charterers as Russian Crude oil’s and products’ market prices were below the cap. But in previous days Russia’s Urals crude breached price cap, adding another headache to the wet market of seaborne trade.  Russian Urals crude oil futures were trading around USD 63 per barrel mark on Friday 14th of July after remaining largely unchanged below the price gap imposed by the G7 since the beginning of May.  Despite this increase, the Russian benchmark, which constitutes roughly 50% of Russia’s oil exports, continues to trade at a nearly USD 20 discount compared to the international Brent crude oil benchmark.  Recent data for June shows a small fall in Russian exports, with India along with China accounting for approximately 75% of total shipments in June, while Turkey and Egypt accounted for 6% and 5% respectively.  India’s imports of Russian Crude are about 1.6 million barrels per day while China’s imports from Russia are almost at the 2/3 of India’s, at 1 million barrels per day.  These numbers are a bit lower than April 2023 when India was importing 1.8 million per barrels and China 1.2 million per barrel respectively.  On the Russian oil products export side, the things are the opposite.  Russian exports have risen with Turkey importing 582,620 barrels per day, UAE importing 304,591 barrels per day and Singapore 303,100 barrels per day.  Turkey’s exports are about 34% higher than April 2023, while UAE and Singapore have doubled their product imports from Russia since April 2023 taking the place of China and Saudi Arabia at the second and third place”, the shipbroker noted.

Meanwhile, “the TC Equivalents of VLCC, Suezmax and Aframax are on well below levels compared to first days of January 2023, with the TCE of VLCC being down around 20% and paying USD 19,993/ day, while the TCE of Suezmax and Aframax have lost around 50% (since 5th January 2023) each and now pay USD 36,742/ day and USD 32,804/ day respectively.  On the product side, MR Atlantic Basket is down by 44% since the beginning of 2023 while MR Pacific Basket is losing about 57%, with both standing at USD 16,379 and USD 21,725/day respectively.  MR Atlantic Basket is the only one TC Equivalent that stands below its 10year average.  All the other TCEs (Pacific, VLCC, Suezmax, Aframax) are above their 10year average for almost all the days since February 22nd 2022 that the Russian invasion of Ukraine started”, Xclusiv concluded.

At the same time, from the beginning of 2023, “the demand for vintage tankers is quite significant, boosting the prices of most 15-year-old vessels at higher levels than market’s expectations. As it was mentioned above, wet market’s freight rates have corrected significantly YTD, but this correction has not affected much the assets’ prices. In the VLCC segment, a 5-year-old vessel has lost only 4% since the beginning of the year (with current value at USD 96 mills), a 10-year-old VLCC is almost 9% lower since January 2023 (USD 70 mills), while a 15-year-old VLCC has lost around 5% and is now valued at USD 57 mills. Moving down the sizes, the Suezmax segment has witnessed an increase (around 3%) on 15-year-old vessels with their price being now around USD 39 mills. Furthermore, the price of 10-year-old Suezmax has also increased compared to the start of the year being now around USD 55 mills, while the current value of the 5-year-old Suezmax is at USD 72 mills, almost 7% up y-t-d. The 5-year-old, 10-year-old & 15-year-old prices of Aframax/ LR2 are also up by around 2%, 4% and 3% respectively year to date, and their values are at USD 63 mills, USD 51 mills & USD 37 mills accordingly. Last but not least, in the MR size, prices are almost at the same levels for 5-year-old and 10-year-old vessels, while the 15-year-old MR2 price is about 5% higher from the start of the year”, the shipbroker concluded.

Higher seaborne crude oil flows are up 8.5% during the first five months of 2023, with China, the E.U. and India, all posting higher imports.  In its latest weekly report, shipbroker Banchero Costa said that “2022 was a very positive year for crude oil trade, despite the surging oil prices and risks of economic recession.  In the full 12 months of 2022, global crude oil loadings went up +8.7% yo-y to 2,049.8 mln tonnes, excluding all cabotage trade, according to vessels tracking data from Refinitiv.  This was well above the 1,886.3 mln tonnes in Jan-Dec 2021, but slightly below the 2,110.5 mln tonnes in the same period of 2019”.

“2023 so far has been even stronger: during the first 5 months of the year crude oil exports increased by +8.5% to 898.8 mln tonnes.  Exports from the Arabian Gulf were up +3.2% y-o-y to 362.6 mln tonnes and accounted for 40.3% of global seaborne crude oil trade, slightly below last year 42.9% overall.  Exports from Russia have been increasing as well by +6.8% y-o-y during the first 5 months of the year to 100.1 mln tonnes, or 11.1% of global trade.  From the USA, exports surged by +21.5% y-o-y to 78.2 mln tonnes.  From West Africa, however, exports declined -2.5% y-o-y to 70.8 mln tonnes.  From S America, exports have been increasing by +22.6% y-o-y to 62.3 mln tonnes in Jan-May 2023”, the shipbroker said.

According to Banchero Costa, “in terms of demand, seaborne imports into China are up +12.9% yo-y to 206.0 mln tonnes and a 22.8% share of global imports.  The European Union (27) increased by +7.3% y-o-y to 196.9 mln tonnes and a 21.8% share.  Imports to India also increased by +5.3% y-o-y in the first 5 months of 2023 after a strong +11.0% increase in 2022.  India has been steadily the third largest crude oil importer with an 11.0% so far in 2023.  Imports into India have grown rapidly over the years, driven both by domestic demand, but also due to the establishment of a large exportoriented refining industry”.

“The main source of Indian imports is still the Arabian Gulf with 46.2 mln tonnes, a share of 46.4%, but imports have been dropping -26.1% so far this year.  Both Iraq and Saudi Arabia, the two largest suppliers of crude oil to India from the region, have seen their volumes dropping by -18.1% and – 13.7% respectively.  The big gainer of course is Russia whose imports are spiking towards India: during the first 5 months of the year India imported 2.2 mln tonnes in 2019, 3.6 mln tonnes in 2020, 1.6 mln tonnes in 2021, 5.3 mln tonnes last year and 30.5 mln tonnes in 2023, an increase of +471.8%.  Russian crude oil exports represent now a 30.6% share.  With the Arabian Gulf and Russia having a combined share of 77% there is not much left for the other exporting countries.  United States exports have been dropping -32.7% to 5.1 mln tonnes so far this year and US supply just 5.2% of Indian Imports in 2023.  West Africa is the last major source of Indian crude oil imports with a share of 4.4%.  Imports from West Africa fell -52.9% so far in 2023 to 4.4 mln tonnes vs 9.3 mln tonnes in 2022.  With the larger share of imports coming from Russia also the tonnage used for imports has been changing: about 47 percent of crude oil volumes discharged in India in 2023 were carried in VLCCs, about 30 percent in Suezmaxes and 23 percent on Aframaxes.  In 2022, 51 percent was in VLCC, 35 percent in Suezmaxes and 13 percent in Aframaxes”, the shipbroker concluded.

The Aframax tanker market and more specifically those loading out of the US could find additional support, in terms of the freight rate market. In its latest weekly report, shipbroker Gibson said that “North Sea Brent, the main global benchmark for crude oil pricing is moving with the times to reflect new market realities. Originally based on North Sea production since the 1970s, questions have arisen in recent years over the benchmark’s viability for pricing oil contracts, given the declining output of Brent and other North Sea grades with the implications this could have for trading liquidity. Brent has now been thrown a lifeline with the inclusion of US WTI crude into the dated Brent basket which should in theory alleviate concerns about volumes by significantly increasing the quantity of delivered crude into the North Sea basin, providing a liquidity boost going forward”.

However, according to Gibson, “this could provide an interesting development for the crude tanker market, given there is an important freight element to this new liquidity. In the new Brent price assessment only Aframax cargoes of 700kbbls will be included, this may provide some support to Atlantic Aframax tankers loading out of the US as traders look to move cargos consistent with the updated pricing framework. Kpler data shows that since 2021, US crude volumes to Europe carried on Aframaxes increased modestly from 844 kbd to 894 kbd in 2022 but this has since weakened in 2023 as barrels have shifted onto larger Suezmax and VLCCs This means the pricing framework may require some adjustment going forward to reflect this shift up to larger cargo sizes”.

“This too may improve chartering appetite for transatlantic VLCCs and Suezmaxes out of the US going forward as economies of scale mean a cargo of 2 million or 1 million barrels on a VLCC or Suezmax respectively should be cheaper than a 700kbbls Aframax cargo, which should be more appealing for traders given the underlying economics and the ability to sell WTI into Europe. However, this will also depend on fluctuations within the individual tanker segments in terms of freight rates and which provides the best value on a $/bbl basis and how this plays out in terms of market practice remains to be seen. In addition, Aframaxes may be preferred over larger vessels due to the cost and complexity of lightering and STS operations off Europe, but this will likely be price driven”, the shipbroker said.

Gisbon added that “in terms of overall timing, this comes as the US increasingly exports more cargo to Europe to replace lost Russian crude barrels following the December 5th import ban and as such this should be welcome news for European buyers of WTI. Fundamentally, Europe needs crude, both from within the region and from strategic partners such as the US to secure oil supply security. In terms of the tanker market, the inclusion of WTI into Brent pricing should help to support the Atlantic Aframax market through a base of demand but this will depend on the ability of such trade volumes to be maintained as well as the trajectory of European decarbonisation and the implications for regional oil demand”, the shipbroker concluded.

The LNG shipping market is about to experience a great year earnings-wise, at least according to existing fundamentals projections. In its latest weekly report, shipbroker Intermodal said that “in a market where LNG spot prices follow a downward trajectory since late December, period charter rates for LNG vessels are also marginally retreating from their firm positions. Yet, owners still require firm figures amid a positive demand outlook, especially for 2H2023”.

 

According to Intermodal’s Research Analyst, Ms. Chara Georgousi, “in 2022, LNG imports have skyrocketed mainly driven by the war in Ukraine which prompted growth in wealthy European countries. In the meantime, extended covid restrictions in China were reflected in lower imports as the country largely shifted away from the spot market. According to Bloomberg, China’s 2022 imports marked a 19.4% y-o-y decline and averaged 64.44m tons. Instead, Europe’s imports skyrocketed to 124.93m tons over the same period, marking a spectacular 59% y-o-y surge”.

She added that “in 2023, the dynamics established in 2022 are to persist with Europe maintaining elevated LNG imports, while the reopening of China may boost demand. To begin with, the much-anticipated recovery of the Chinese economy will pivot global gas markets. China’s LNG demand is set to rise, especially from 2Q onwards. In numbers, demand growth in 2023 is forecast at 382 billion cbm, with the industrial sector leading the way. Still, Chinese spot demand will remain tight due to the start of new contract deliveries. In the meantime, European countries will continue to scramble to replace lost Russian pipeline volumes. Imports will remain elevated and will be pulled from farther away, thus increasing ton-miles for seaborne deliveries. Demand destruction will persist in 2023, however, the trajectory is uncertain. Seaborne imports are expected to peak towards the 3Q and ahead of the next winter when the bloc’s countries will need to refill their storage. In SE Asia, Thailand will lead the LNG demand growth amid declining domestic production and pipeline imports, while Singapore will witness increased demand for the power sector, as well as increased usage of LNG as bunkering fuel during 2023. Overall, global LNG demand could increase by 19m tons in 2023, according to Bloomberg”, Ms. Georgousi said.

“And while demand shows signs of recovery, limited supply growth will keep the supply/demand balance tight through 2023. Supply growth is projected to be a marginal 3.4% which will be driven by recoveries from plant outages rather than new capacity. In the US, gas production will remain strong, however, it will be constrained by limited LNG export capacity additions over the course of the year. Meanwhile, an additional 56m tons of project capacity approvals are expected within 2023 mainly on behalf of Qatar and the US. These two major producing countries are set to drive a gigantic global expansion program. Overall, supply growth will be limited until 2025, but between 2026-28 we foresee an average supply growth of 5.7%, based on post-final investment decisions. The key driver behind this projected growth is pressure from regulators and investors for cleaner LNG across the value chain which will buoy long-term demand”, Intermodal’s analyst said.

“Seaborne-wise, in terms of vessel supply, according to our preliminary data, in 2023, a total number of 144 new vessels will enter the LNG trade which is anticipated to match the new liquefaction capacity that will be added this year of more than 15m tons. Ton-mile growth is forecast more than 3.5%, underpinned by the resumption of exports from the Freeport LNG Terminal.

Moreover, the scheduled dry-docking of several older vessels within the year will limit vessel availability and thus, underpin freight rates. As for IMO’s CII regulation which came into force in Jan-23 and will be reinforced by 2026, this will act supportively as it will prompt vessels to slow steam and thus, increase ton days. Lastly, S&P activity seems to gain momentum, as in 2022 a total of 43 vessels exchanged hands, according to our database, while in 2021 only 8 vessels have been reportedly sold. As the short-term and spot market continues to develop, more independent owners will be prompted to enter the trade in 2023, and we could expect to see more second-hand sales being reported throughout the year”, she concluded.

Source: Hellenic Shipping News Worldwide

The latest round of sanctions on Russian oil is bound to offer yet more support to the product tanker market. So far, Russia’s major clients, like the EU, have reduced their imports of crude oil considerably, but this hasn’t happened to the clean market, at least not in the same pace. In its latest weekly report, shipbroker Gibson said that “the EU ban on imports of Russian crude is set to come into effect. Still, huge uncertainty remains about the impact of sanctions and the price cap itself. The cap is designed to give additional bargaining power to buyers in third countries with minimal disruptions to crude flows. However, Russia has repeatedly stated (prior to the announced cap of $60/bbl) that it will not sell its crude under these conditions and is reportedly seeking to boost the recognition of Russian maritime cargo insurance. As such, the next few weeks will be critical, revealing how strong Russian determination not to sell its barrels under an arguably reasonable price cap level is, the appetite for Russian crude in third countries as well as the potential capacity of the tanker fleet willing to service price capped and/or non-price-capped exports of Russian barrels”.

According to Gibson, “what will happen on the crude side, will offer an indication of what is likely to happen when the EU ban on imports of Russian clean and dirty products comes into effect on 5th of February. Yet, whilst there are many similarities between the crude and product markets, there are also some differences. Russian crude exports to the UK and EU countries in Northwest Europe (which in the past, accounted for the vast majority of Russian trade to Europe) have been in steady decline since spring, falling to just 120 kbd in November from 1.27 mbd in January/February 2022. In contrast, Russian clean exports to the UK/EU show a considerably slower rate of decline, with the trade averaging 0.77 mbd in October versus 1.2 mbd during the 1st two months of this year. Furthermore, exports actually increased to 1 mbd in November, which suggests that Russia could be maximizing product exports until the February deadline”.

“Furthermore, no major reshuffle in Russian CPP export flows has been seen so far to date. There have been some increases in shipments to the Middle East, West Africa and Latin America; however, these gains have been fairly limited, although trading of Russian products via storage terminals in Northwest Europe has also seen an increase. Potentially, Russia could find it more difficult to find the same level of demand in third countries as it has found this year for its crude. After all, oil demand in likely markets where Russia can place its products is considerably lower than consumption in advanced western economies. If that’s the case, Russia could be forced to compensate by increasing crude exports and/or to reduce its refining runs”, the shipbroker said.

Gibson concluded that “without doubt, however, the product tanker market is likely to see further increases in tonne miles. The CPP trade into Europe from further afield has already increased substantially in 2022, most notably from the Middle East, India and Far East, supported by Russian sanctions, the regional rebound in demand during the 1st half of the year from Covid related restrictions and the closure of refining capacity in 2020/21. When the time comes for Europe to fully wean itself off Russian products, the latest trends in global product flows can only accelerate”.

The tanker market recovered part of the lost ground, as the month of September shows clear signs of improvement. In its latest monthly report, OPEC said that Very Large Crude Carrier (VLCC) rates continued to gather strength in September, with gains seen on all major routes. Spot VLCC rates on the Middle East-to-East route rose 26%, while on the West Africa-to-East route, they gained 23%. Suezmax and Aframax rates came down from the elevated levels seen since March. Suezmax rates on the US Gulf Coast (USGC)-to-Europe route declined by 7%, while Aframax spot rates on the Cross-Med route declined by around 13%. All monitored routes were well above the levels seen in the same month last year. Clean rates saw diverging trends, with gains East of Suez and declines West of Suez. On the Middle East-to-East route, clean spot rates rose by 13% m-o-m in September.

The latest estimates show global spot fixtures declined in September to average 14.3 mb/d. Fixtures fell by 1.1 mb/d, or around 7% m-o-m. Compared with the previous year, spot fixtures were down by 1.9 mb/d or almost 12%.

OPEC spot fixtures were marginally higher in September, averaging 10.5 mb/d. This represents a gain of less than 1%. In comparison with the same month in 2021, fixtures were about 0.6 mb/d, or over 5% higher. Middle East-to-East fixtures rose 0.6 mb/d, or over 9%, to average 6.5 mb/d. Compared with the same month last year, eastward flows from the Middle East were about 0.5 mb/d, or almost 7%, higher. Spot fixtures from the Middle East-to-West fell further in September, down by around 0.3 mb/d, or about 19% m-o-m, to average 1.4 mb/d. Y-o-y, rates were 0.5 mb/d, or about 58% higher. Outside the Middle East, fixtures averaged 2.6 mb/d. This represents a loss of 6%, or about 0.2 mb/d, m-o-m and a decline of 0.6 mb/d, or 19%, y-o-y.

OPEC sailings fell by 0.4 mb/d, or less than 2%, m-o-m in September to average 23.9 mb/d, and were 1.8 mb/d, or about 8%, higher compared with the same month a year ago. Middle East sailings increased by just over 0.1 mb/d in September to average 18.8 mb/d. Y-o-y, sailings from the region rose by about 2.2 mb/d, or around 13%, compared with September 2021.

Crude arrivals in September declined m-o-m across all regions. West Asia led losses, falling 0.8 mb/d, or 10%, to average 7.5 mb/d. Y-o-y, arrivals in the region were 0.5 mb/d, or about 7% higher. Arrivals in the Far East decreased 0.1 mb/d or just under 1% to average 15.1 mb/d, while y-o-y, they were about 2.1 mb/d, or almost 16% higher. In North America, arrivals declined by around 0.4 mb/d or about 4% m-o-m, averaging 8.9 mb/d and were 0.2 mb/d, or about 2%, lower y-o-y. Arrivals in Europe fell 0.3 mb/d, or less than 3%, to average 12.3 mb/d. This was 0.3 mb/d, or about 3%, lower than in the same month last year.

VLCC spot rates continued to pick up in September, gaining 25% on average m-o-m. The sector saw support from a return of US crude flows to Asia. Y-o-y, VLCC rates were up 139% on average. On the Middle East-to-East route, rates gained 26% m-o-m to average WS86 points and were 139% higher y-o-y. Rates on the Middle East-to-West route rose 22% m-o-m to average WS50 points. Y-o-y, rates on the route increased 127%. West Africa-to-East spot rates gained 23% m-o-m to average WS86 points in September. Compared with the same month last year, rates were 132% higher.

Suezmax rates edged lower in September, down 2% m-o-m but still well above the levels seen in the same month over the last five years. Rates remained supported by ongoing trade dislocations, which boosted demand for longer-haul voyages in the Suezmax class. Spot freight rates on the USGC-to-Europe route declined 7% compared with the previous month to average WS113 points. Y-o-y, rates were 131% higher. In contrast, rates on the West Africa-to-US Gulf Coast (USGC) gained 2% to average WS127 points. Compared with the same month last year, they were 165% higher.

Aframax spot freight rates weakened on all monitored routes, although remaining at exceptionally high levels compared with the same month over the last five years. On average, spot Aframax rates fell 11% m-o-m in September. Compared with the same month last year, rates were 123% higher. Rates on the Indonesia-to-East route declined marginally to average WS227 points in September. Y-o-y, rates on the route were up 155%. Spot rates on the Caribbean-to-US East Coast (USEC) route declined 18% m-o-m to average WS246 points. Y-o-y, rates were 134% higher.

Mediterranean spot freight rates fell back in September. Cross-Med spot freight rates declined by 13% m-o-m last month, to average WS175 points. Y-o-y, rates were still 97% higher. On the Mediterranean-toNWE route, rates dropped by 10% m-o-m to average WS156 points. Compared with the same month last year, rates were around 95% higher.

Clean spot freight rates experienced mixed performance, with East of Suez rates recovering some of the losses seen in the previous month, while West of Suez rates fell with the end of the driving season. On average, rates declined 1% m-o-m in September but were still up 138% compared with the levels seen in the same month last year.

Rates on the Middle East-to-East route rose 13% m-o-m in September to average WS304. Y-o-y, rates were up 167%. Freight rates on the Singapore-to-East route also improved m-o-m, up 21% to average WS415; that is 168% higher compared with the same month last year. In contrast, the West-of-Suez market continued to fall from robust levels seen since April. Spot freight rates on Northwest Europe (NWE)-to-US East Coast (USEC) route fell 11% m-o-m to average WS258 points. They were 153% higher y-o-y. Rates in the Cross-Med and Med-to-NWE edged down 16% each to average WS228 and WS238 points, respectively. Compared with the same month last year, rates were around 98% higher on both routes.