Despite the onset of winter, the global tanker market has not yet bounced back given the excess supply in the market. Prices for the tanker segment haven?t picked up, say industry veterans adding that an improvement was unlikely soon because the supply-demand gap would continue to widen at least for another year or so.
While the possibility of a cold winter and demand for oil in the US and Europe can provide some support for the tanker rates, in the short term, large US inventories of both crude and distillates caps chances of major oil movements.
?Despite the winter, a prolonged weakness in demand from the western economies, coupled with an increase in the fleet supply will keep the lid on tanker freight rates,? says a report by Dolat Capital.
Unless there serious slippages in the order book and many single hull vessels are phased out, therefore, tanker rates are unlikely to bounce back.
Freight rates, commanded by companies to ship oil in very large crude carriers (VLCCs), have slipped below $10,000 per day this year, in the global market. That is virtually lower than a vessel?s operating costs and way lower than rates of ?$130,000 per day, seen last year. ?After the global slowdown in 2008 post the financial crisis, the tanker market had seen an uptick in 2009. However, this was short lived and after six months the supply of tankers increased with more deliveries. VLCC spot rates in India and China are better than in other parts of the world,? said a shipping official.
During the September 2010 quarter, the Mercator Group added one Aframax tanker, and one Panamax dry bulk carrier. Moreover, the group has contracts to acquire one more Panamax. The tankers segment contributed about 19% to the company?s total revenues for the first half of the financial year 2010-11.
Great Eastern Shipping, which has among the largest exposures to the tanker market (fleet comprises 80% tankers), currently has a total capex commitment of around Rs.2,550 crore. This will result in addition to the tonnage of about 1.31 million dead weight tonnage (dwt) (three VLCCs, two Supramaxes and three Kamsarmax dry bulk carriers).