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Liquid Bulk Shipping: The Start Of A Brutal Down Cycle
Business Monitor International, Aug 2011, Pages: 30
Ongoing Overcapacity
The global crude-oil shipping sector continues to be affected by the overcapacity that is plaguing the container and dry bulk shipping sectors also. Vessels ordered during the boom years continue to come online, and although the ordering appears to have slowed, there is much extra tonnage still scheduled to be floated. Despite reported increased demand from Japan in the wake of the country’s nuclear scare in March, and the ever-growing needs of China and other emerging markets, BMI does not believe that demand growth will be sufficient to absorb the tonnage, especially given the flat growth we project in the OECD countries this year. As such we agree with leading tanker operators in projecting a continued period of pain for the sector, especially for the larger vessels.
Drivers Key Views
- Global oil supply and demand to grow, though not sufficiently to absorb tonnage.
- Increased Saudi production potential lifeline for tanker industry.
- US oil imports to fall, China to take up some of the slack.
- Non-OECD countries will drive demand growth.
- Short-term risk to oil import demand from the IEA stockpile release.
Capacity Key Views
- Liquid-bulk sector to continue to suffer from overcapacity in the market.
- Very few vessels remain to be scrapped.
- Slow-steaming on ballast legs is becoming industry practice.
- New orders slowing, but tonnage still coming online.
Rates Key Views
- Rates on key index and benchmark tanker routes will continue to fall.
- Tanker operators will struggle to maintain their bottom lines.
- Larger companies already looking forwards to after the slump; smaller operators to suffer.
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