London +4420 814 42225
Moscow +7495 543 9194
Kiev +38044 599 2950
info@mrcplast.com

Our Clients

Order Informer

 
Home > News >
 

Oil tankers face new normal amid pandemic and decarbonization drive

September 28/2020

MOSCOW (MRC) -- The global tanker shipping industry is likely to find a new normal in the medium term, with sales of second-hand ships taking center stage while orders for newbuilds slow down, said S&P Global.

Meanwhile, existing tanker companies may become bigger as ships change hands, or they may form pools to enable better bargaining with charterers, while shying away from ordering new ships. Uncertainties over how and when the coronavirus pandemic will end are partly behind the new approach, but so is the higher use of greener fuels. The global health crisis hit when the shipping industry was already in the throes of a major transition to a low-sulfur fuel regime, and starting to plan for its eventual decarbonzation.

While in 2020 to date shipowners benefited from a glut of oil supply and the ensuing demand for floating storage, leaner days may be ahead now that crude flows have evened out and global oil consumption has slumped. This, along with the longer-term impact on oil demand from the energy transition, is already having a clear effect on investment in the sector.

From January this year, the tanker sector, along with its dry bulk and container shipping peers, successfully executed a worldwide plan steered by the International Maritime Organization (IMO) under which marine fuels with more than 0.5% sulfur can only be used in ships that have exhaust systems called scrubbers fitted on them.

With larger-scale investments already made to adjust to the new system, tanker owners are now hesitant to pour money into fresh greenfield projects. The value of all kinds of ships is falling, according to Copenhagen-based Peter Sand, chief shipping analyst at BIMCO, the worlds largest international shipping association with more than 2,200 members. Even though sale and purchase activity in the tanker sector remained active into April, thereafter it started to ease, Sand said.

A sale and purchase broker cited the example of a 2005 built, 302,000 dwt VLCC recently changing hands at just under USD27 million. Sales of a couple of similar 15-year-old ships in April took place at around USD37-39 million.

Analysts point out that the April-May period was exceptional, in that low crude prices made floating storage of crude and refined products lucrative, and supported the prices of tankers as well. According to UK-based shipping consultancy VesselsValue, the phase of high-priced tanker sales has ended for the time being and rates are now in a period of adjustment. The total shipping order book, including tankers, is now at a 17-year low as the coronavirus pandemic has massively slowed contracting, Sand said. Orders for new tankers have dropped more than 40% in the first seven months of 2020 compared with the year-earlier period, according to BIMCOs estimates.

Instead of ordering new ships, companies are looking for greater synergies. In June, through a combination of pool and time charter deals, Trafigura Maritime placed seven of its tankers with Navig8, which owns and operates vessels and also manages shipping pools. Around the same time, owner and operator companies NORDEN and Diamond S Shipping Inc. formed a joint partnership, DiaNor. Under the agreement, Diamond S is contributing 28 Medium Range tankers to the NORDEN-owned Norient Product Pool, making it one of the worlds largest, with close to 90 such ships. Diamond S CEO Craig Stevenson in a statement described the move as much needed consolidation in the tanker industry."

Through long-duration arrangements such as time charters, or contributing ships to a single pool, owners can increase the possibility of garnering higher freight and avoid having to undertake complete transfer of ownership through mergers and acquisitions.

As MRC informed earlier, global oil refiners reeling from months of lackluster demand and an abundance of inventories are cutting fuel production into the autumn because the recovery in demand from the impact of coronavirus has stalled, according to executives, refinery workers, and industry analysts. Refiners cut output by as much as 35% in spring as coronavirus lockdowns destroyed the need for travel. As lockdowns eased, refiners increased output slowly through late August. But in top fuel consumers the United States and elsewhere, refiners have been decreasing rates for the last several weeks in response to increased inventories, a sustained lack of demand, and in response to natural disasters.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.


mrcplast.com
Author:Anna Larionova
Tags:petroleum products, crude oil, neftegaz, petrochemistry.
Category:General News
|
| More

Leave a comment

MRC help

 


 All News   News subscribe