Strong demand for crude will be key for 2011 tanker market: report

A major question that remains in the tanker market for next year is whether the over-investment in buying new tankers will see a strong demand for crude cargoes, ship brokers Poten & Partners said in a report released over the weekend.
“There have been modest signs of recovery reflected in the fourth quarter 2010 as VLCC cargoes of crude oil in the Arabian Gulf have seen a 20% increase year to date,” the report said.
Vessel supply has long dictated the speed of market recovery, while the age restrictions at terminals and industry standards for younger trading vessels may push more tonnage out of the market, it added.
Giving a break up of the global tanker fleet, the report noted that there were 559 Very Large Crude Carriers (VLCCs) and 380 Suezmaxes with an average age of 7.5 years to 8 years; 897 Aframaxes with an age of 8.5 years; 382 Long Range I vessels at 6.5 years and 1,350 Handymax and Medium Range ships between 6.5 and 7 years.
With the phase out of single hull vessels almost complete and no improvements seen in fundamentals, the medium term is shaping up to be a challenging time for shipowners, the ship brokers said.
“While order-book delivery will be a key element of market upswing over the medium term, the near term prospects for the tanker industry remains tied to recovery of international economies,” Poten said.
Although there are signs of impending gloom for the tanker market, the global crude demand to the Asian countries, especially China and India, offers hope for the sector.
“Expanding oil demand in these markets will likely translate into increased tonne mile-demand as rapidly growing nations look to sources far and wide to fulfill their domestic requirements,” the Poten report said. The tonne-mile demand denotes demand for long haul voyages, for example from the Caribbeans to India or China, and is calculated by multiplying the volume of the cargo moved in metric tonnes with the distance travelled in miles. If there is more demand for long haul voyages, the tonne-miles go up. Long voyages, in turn, mean more vessels are taken up for longer duration thus crunching availability.
“A clear understanding of these countries’ current role in the petroleum industry and their roles in transforming global tanker trade routes will be paramount in identifying opportunities in these expanding markets,” the report added.