The worst for the tanker industry, hit early last year by a demand dip owing to the economic slowdown, may be over but recovery would still be slow, say experts.
While the Baltic Clean Tanker Index, a benchmark for estimating tanker industry, has seen an upside of 42%, from 590.5 units in December 2009 to 840.75 units in January 2010, tanker rates have not been moving in tandem with it.
Indian shipping companies like GE Shipping have 12 crude carriers in its fleet with 1.54 million dwt tonnage, Mercator lines has 11 and Varun Shipping 3. Others like the Shipping Corporation of India and Essar Shipping also have tankers in their fleet.
Tanker rates (very large crude carriers or VLCC) have seen a turnaround from $10,000 per day in June 2009 to $35000 per day currently. Winter, along with an increase in higher floating storage demand, has led to a rise in tanker rates. ?Due to winter, prices are a bit better. Amongst tankers, bulk carriers and container, the tanker industry will see the most rapid growth in rates. Even the excess tonnage will be absorbed,? said Sudhir S Rangnekar, CEO, Indian National Shipowners Association (INSA). Oil storage capacity in product tankers has gone up from 90 million barrel (bbl) to 100 million bbl. As the oil demand in the international and Indian market has gone up by 1.5% and 3% on a yearly basis respectively, tankers demand is set to grow further. ?Tanker demand will not be determined by the quantum of movement but also by tonnage mile. Due to refineries shifting to less developed or undeveloped countries, tonnage mile is increasing, leading to growth in tanker demand,? he added.
As per the industry insiders, tanker rates are set to increase by 10-15% in the short to medium term. Phasing out of single hull tankers early this year has also spurted up tanker rates. ?We believe that the tanker markets which have been impacted by the Organisation of the Petroleum Exporting Countries (Opec) production cuts and dwindling oil demand, should recover once the oil consumption picks up and inventory are drawn down. This market has historically been more resilient than the other shipping markets,? said a report from Batliwala and Karani Securities.
As per Sejal Jhunjhunwala, an analyst from Way2Wealth, surge in crude prices to the tune of about 6% since December, supported by a cut in production by the Opec has also fueled tanker rates and demand. ?Excess delivery which was expected in 2009, will be coming this year along with new deliveries which will pressurise asset prices,? she added.
Shipping companies are sitting on a huge order book, of which tankers account for 35% of their existing fleet.