In the midst of a tanker market down-cycle, pressured by over-ordering in prior years, DPP freight rates have surged to the highest levels observed since the winter season of 2016/17. Spot rates on the VLCC TD3C trade began September in the low WS 50s before gradually trading up towards WS 60.5 towards the conclusion of the month. Through the first half of October, the market surged to the WS 80s, peaking as high as WS 88. Many market participants will look to this as sign of a cyclical reversal; however, we view this as a temporary shock to the market influenced by various underlying dynamics.
As we approach one of the most impactful marine environmental regulations in history, leaders of the shipping community have addressed the International Maritime Organization (IMO) with a proposal for a more gradual introduction of the 2020 0.5% sulphur emissions limit. Although this is an unprecedented event, we can draw parallels with methods used by the California Air Resource Board (CARB) to enforce ECA regulations. In this note, we discuss the historical context of the IMO’s progression on environmental issues, the current outlook for the 0.5% regulation and parallels between shipowners’ position and methods used by the CARB, which may act as a template for smoother implementation.
Our review of the VLCC fundamental outlook for our Mid-Year Update publication showed that the crude and residual fuel oil transportation market will remain structurally over-supplied in 2019 with commensurate weakness in VLCC (and other DPP segments) freight and earnings before re-balancing thereafter. In this note, we highlight the reasoning for our 2019 view in the context of historical observations.
As a supplement to this year's 2018 Mid-Year Tanker Market Outlook Update, we've developed an "Outlook Scorecard," a review of our 2018-2022 Tanker Market Outlook published in January, and updated forecasts for 23 major tanker trades across 8 vessel segments. The one-page format makes it a perfect desk reference that can be used through the balance of 2018.
Download McQuilling Services 2018 Offshore Floating Systems Snapshot for a quick look at the age profile of the offshore floating fleet, size distribution, major deployment locations as well as newbuildings under construction and vessels undergoing conversion.
The tanker demolition market has picked up the pace in 2018, following a period of below average deletions due to favorable market conditions and younger fleet profiles. From our analysis, one market factor does not drive tanker demolitions, but rather a confluence of factors such as an aging fleet, depressed freight rates, higher steel scrap prices and regulatory constraints, but also micro considerations from owners.
McQuilling Services provides a summary of key market indicators reflecting past performance and future expectations in an easy to read scorecard format. This document displays a snapshot view of what to expect over the next year in comparison to previous market performance.
Our overall forecast performance for 2017 was within 6.4% of actual market freight rates across the 19 trades that were monitored in the 2017 Outlook. This was achieved throughout a year that could be characterized by significant tanker oversupply, geopolitical tensions and evolving oil market fundamentals. This metric is a measure of the absolute average of the total variation on a trade-by-trade basis, regardless of whether we overcast or undercast the market on each trade. In other words, it is a measure of how close we came, on average, to the actual spot market rates observed on each trade.
McQuilling Services is pleased to announce the release of its 2018-2022 Tanker Market Outlook. This 200-page report provides a five-year spot and time charter equivalent (TCE) outlook for eight vessel classes across 23 benchmark tanker trades, plus four triangulated trades. Also included in the report is a robust five-year asset price outlook as well as a one and three-year time charter forecast through 2022. With 21 years of tanker rate forecasting expertise, McQuilling Services is a leader in the industry and continues to support a variety of stakeholders in the energy, maritime and financial services industries with its annual Tanker Market Outlook.