Frontline CEO: More Scrapping Needed to Lift Rates

Image Courtesy: Frontline

The second half of 2018 may see a rise in freight rates for oil tankers as owners are expected to speed up their demolition of older tonnage, Frontline CEO Robert Hvide Macleod is quoted as saying by Reuters.

According to Macleod, the market strengthening is not likely in the short-term, “even though the current weakness at the start of the winter season is surprising.”

Poor earnings have been the key driver of tanker demolition over the past year.

Data from Clarksons shows that demolition volumes in the tanker sector surged from around 2.3 million dwt in 2016, to 95 vessels of 9.5 million dwt in the year to date.

Going forward, if owners want to see a pick-up in rates the time has come to remove the less efficient vessels from their fleets.

“If oil demand grows as expected, the tanker market in the second half of 2018 will be interesting. And faster if scrapping were to increase significantly,” Macleod said.

However, attractive pricing of new ships has seen owners flock to the yards this year, further adding to the excessive tonnage, which is likely to prevent market recovery.

The ordering of tanker newbuilding has increased year to date by 17 percent when compared to 2016, according to Intermodal.

Hopes of a market recovery are further shattered by the shipping consultancy Drewry, which forecasts a further drop in freight rates in 2018 amid an expected slowdown in China’s crude stocking activity.

Although tonnage supply growth in the crude tanker market is expected to come down to 3.2 percent in 2018 after surging by close to 6 percent each year in 2016 and 2017, this will not be enough to push tonnage utilisation rates higher as demand growth is expected to be sluggish, Drewry said in November.

World Maritime News Staff

 

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