New Delhi, November 06, 2020: As clean tankers in the Americas experience multiple-year freight lows, shipowners are looking toward factors that could support clean tanker freight in the next year and beyond, including the expanding refinery landscapes in Asia and the Arab Gulf and an aging global fleet, Ardmore Shipping outlined in its third-quarter earnings call Nov. 4.
CEO of Ardmore Shipping Anthony Gurnee said that the near-term outlook for clean tankers was challenging, with tanker spot rates running at very low levels due to the economic impact of the coronavirus pandemic. Third-quarter time charter equivalent levels for Medium Range tankers averaged just shy of $13,000 per day, according to Ardmore. This level decreased further into October, which saw a fleet average TCE of $10,750/day on a discharge-to-discharge basis, according to Ardmore.
October saw freight fall to multiple-year lows for some USGC-loading routes, and freight has fell further on some routes in the first decade of November. On the 38,000 mt USGC-Brazil route, freight fell to $15.45/mt Oct. 22-Nov. 2, the lowest level observed since Oct. 11-18, 2016, when freight fell to $15.13/mt. On Nov. 3, 2020, freight reached the lowest level recorded by Platts, $14.92/mt, though ticked upward slightly thereafter and was assessed at $15.45/mt Nov. 4.
The USGC-Caribbean route also reached four-year lows in October 2020, falling to lump sum $245,000 Oct. 28-30, the lowest level observed since Oct. 14-18, 2016, lump sum $240,000. The USGC-Caribbean route was assessed at lump sum $250,000 Nov. 4, 2020.
Market participants said, at current freight levels, most MR routes see TCE returns well under operating expenses, which range between $5,000/day and $7,000/day depending on the ship. One shipbroker reported negative earnings on the USGC-Caribbean route at the lump sum $245,000 level based on a round trip and factoring in ballasting days.
Shipping market participants are uncertain when rates might pick up, though seasonality would suggest freight would end the year on an upswing, a sentiment that Gurnee shared. Ardmore Shipping expected rates would improve through the fourth quarter, though not to typical winter market levels.
Owners optimistic
Though in the near-term clean tankers are under-performing compared to previous years, shipowners hold hope on multiple factors that could bolster the market in the medium-term according to the reports published in hellenicshippingnews.com.
Gurnee pointed to the International Energy Agency’s World Energy Outlook as the basis of Ardmore Shipping’s demand forecast. The IEA forecast that oil consumption would increase through 2021 as economies reopen, with continued growth reaching 106.8 million b/d in 2030. Current oil consumption stands at 92 million b/d, 7.4 million b/d below January 2020 levels, according to the IEA. Gurnee said that product tanker demand is expected to grow 2%-3% post-pandemic to 2030.
In addition to a rebound in oil demand, the changing refinery landscape including new capacities opening in the Arab Gulf and China should make for increased ton-mile demand to clean tankers, according to Ardmore Shipping.
Tanker supply and a low orderbook for the coming three years also gives owners a positive outlook, with the energy transition to cleaner fuels also putting pressure on older tonnage. The product tanker orderbook stands at 6.1% or 183 ships delivering over the next three years, making for an expected fleet grown of 1%-2% per year through the next two years, Paul Tivnan, Chief Financial Officer of Ardmore Shipping said.
Tivnan estimated that as many as 1,800 ships could be scrapped in the next 10 years in light of the transition to clean energy and the aging of the global product tanker fleet.
