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DPP Ton-Mile Demand Development

Aug. 27, 2021

Through multiple years of enhancement, our tanker demand analysis has gradually switched to use the AIS-drive “Ton-day” as the measuring unit.  However, the traditional “Ton-Mile” demand still serves as a key factor to reveal tanker’s transportation demand in our market fundamental analysis.  In the August Mid-Year Update published this Wednesday, we have updated our tanker Ton-Mile projections for the next five years, separated by each vessel class.

After the difficult 2020, this year is not likely to bring the much-needed relief in the tanker markets, as we correctly predicted in the January.  Our forecasts show that total crude and residual transport is expected to accumulate a little over 10.1 trillion ton-miles for 2021, a 0.3% increase over 2020.  VLCC ton-mile demand is expected to remain virtually the same (0.1% contraction), a little over 6.3 trillion ton-miles in 2021.  The VLCC benchmark Middle East to Far East trade is set to contract by 0.7% in 2021 due to the relatively small crude supply increases and stronger domestic demand in the load region. The tighter US crude balance caused by the higher refinery demand and disciplined production will lead to 11.6% ton-mile contraction of the USG to Far East trade this year but expected to grow by 14% in 2022 when shale oil production ramps up.  Tighter West Africa crude balances (declining Angolan output / Dangote refinery ramp-up) lead to substantial crude tanker demand losses from the region, mitigated by strong Brazilian and Guyanese crude length.

Suezmax intra-regional demand for South Europe to Northern Europe trade is projected to increase by 13.2% in 2021 supported by the return of North African, Russian and Caspian Sea production.  The West Africa to Northern Europe demand is expected to contract by 10% and follow a downward trend when the Dangote refinery brings a total of 650,000 b/d capacity at the load region in 2022-23.

Aframaxes will also find support in intra-European trades from lengthening crude balance in both Northern and Southern Europe, while USG demand to Europe will be heavily skewed to Northern Europe, as the Mediterranean region welcomes Iranian supply from a sanctions-relief scenario.  Upside support to Aframax demand is found from the Trans-Mountain pipeline expansion, which also carries over to Panamaxes due to terminal restrictions.

Figure 1 – Historical & Forecasted DPP Ton-Mile Demand (left) and 5-Year Annualized Growth Rate (right)


Source: McQuilling Services, JBC Energy, IEA, IHS Global Trade ATLAS, US EIA