Tanker Rates Projected to Tumble towards Year End

Image Courtesy: TIL

The influx of tonnage is expected to drive down tanker shipping rates towards the end of the year, according to the latest edition of Drewry’s Tanker Forecaster.

The projection comes as tonnage supply, which has increased at a slow pace in recent years, is expected to accelerate in the next two years with deliveries of product as well as crude tankers. At the same time, a gradual decline in floating storage towards normal levels will increase the available tonnage for seaborne trade.

On the other hand, tonnage demand is only expected to increase at a modest pace in the next two years as the growth in oil trade will be sluggish. As a result, tonnage utilisation in the tanker market is expected to decline from the highs seen in 2015 with stronger growth in vessel supply than in demand.

“Low crude prices resulted in high refinery runs and stocking activity, which in turn caused a surge in both crude and products inventories. Soaring inventory is expected to curb trade growth in 2016, as it will reduce the needs for imports,” said Rajesh Verma, Drewry’s lead analyst for tanker shipping.

“Looking further ahead and with the resultant decline in tonnage utilisation, freight rates are expected to fall in the next two years. However, despite the decline in spot freight rates, tanker earnings will still be attractive thanks to the continued weakness in bunker prices”, added Verma.

To this end, vessel owners need to moderate newbuilding activity, as continued high ordering will put freight rates under pressure over the forecast period.

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