Tanker Market – Clear Sailing for NowJune 1, 2015
When one says “Clear Sailing”, many forget the existence of “Grey Swans” and even “Black Swans”. Yes, “Swans” of all types, “White”, “Grey” and “Black” (and maybe some of colors). Currently, the tanker market is sailing well. Shipowners that experienced serious financial difficulties years ago are now enjoying “good times”. During these difficult years, some hunkered down, other shipowners benefited from acquiring secondhand tonnage/yard resales at attractive prices and others restructured their assets and liabilities or built their organizations with the support of private equity firms. The real key to this recovery was that shipowners had no choice to act responsibly and they controlled their ordering of newbuildings. The dearth of newbuilding orders was in no small part due a spectacular collapse in rates, which had followed an exceptional tanker market from 2002 to the end of 2008.
The current tanker market is benefiting from Middle East OPEC producers and a rationalized fleet structure. While fleet supply is important, the impact of the Saudi Arabia and Middle East producers can not be understated. In particular, Saudi Arabia’s focus to capture and control market share has changed the fortunes of the tanker market. By Saudi Arabia maintaining its crude production levels and the emergence of Middle East refining capacity, it is causing cost floors to come under scrutiny and budgets curtailed in other parts of the world. Saudi Arabia and Middle East producers are attempting to impact the momentum and the production in the Americas. With Middle East onshore crude production in the range of $20 to $40 per bbl. and American output being in the range of $60 to $100 per bbl., Middle East producers are attempting to control the market expansion of American output, In so doing, the actions of Middle East producers are permitting the tanker market to benefit. And while trade patterns are continuing to be influenced by policy and geopolitical turmoil in 2015, we are seeing increased crude and products seaborne trade.
The tanker market is primed for a period of reasonable growth and financial stability. At this point, shipowner management decisions are becoming even more crucial, And while, shipowners need be mindful of a “Grey Swan” or even a “Black Swan”, hopefully, at the very least, shipowners can manage their natural urge to order newbuildings. We may thus be able to see an extended period of growth for the tanker market.