Posting a daily assessment of a tanker owner’s TCE is a challenging task. In addition to the fact that owners generally regard consumption statistics of their tanker fleets as a private matter, this daily number is based on a variety of assumptions. The ultimate goal is to reflect market realities in our TCE calculations to gauge market developments and activity. To achieve this we must make various decisions based on available data and discern how it relates to the market.
McQuilling Services Industry Note No. 11 discussed the clean tanker trading fundamentals beyond 2014. In Industry Note No. 12, we will study the acquisition economics of a new MR2 following the recent uptick of newbuilding contracts. Those investing in the segment argue that the new, fuel-efficient vessels will be justified in the long run and we will attempt to discover if this is economically so. There is no doubt the more recent MR tanker orders will further impact the supply overhang of this vessel class. The move by several key players including Kingfish Tankers, Frontline and Alterna Tanker Pacific JV during the first four months of 2012 is seemingly premature. It does, however, provide a platform for the discussion of acquiring fuel-efficient tankers during weak market fundamentals. The findings of this note are not surprising, but it does provide some insights with regard to the assessment of the “bottoming-out” price in the MR2 segment.
Optimism has been challenged in the clean tanker market since the start of 2012, even when spot rates appeared to be rebounding in the months of February to March. Nevertheless, these marginal upticks still failed to bring many owners back into the black on their books. Lacking any significant improvement in demand fundamentals in the clean product trades, we were surprised by the surge in MR2 newbuilding contracts that were seemingly mirroring spot rate trends since February. Based on the current delivery profile and looming surplus, we believe these orders may be premature and earnings could suffer.