East African product tanker demand could see a major boost on increased demand

So far, it’s mostly been crude tanker owners who have reaped the most from the increase in oil demand, over the past year or so. However, as it seems, soon their product tanker counterparts could soon receive some positive news, as demand seems primed to pick up in new areas as well, leading to increased ton mile demand for their vessels.

In its latest weekly report, shipbroker Gibson tackled the East African market for oil products. According to the shipbroker, “East Africa is an important export market for refiners in both the Middle East and India. Despite this, little attention is often placed upon this market with talk of Africa being dominated by developments in the West and North. Nevertheless the East African nations of Kenya, Mozambique and Tanzania provide major outlets for refiners in the East”.

The shipbroker noted that “East Africa is almost entirely dependent on product imports. With a rapidly increasing population, rising urbanisation, growing vehicle usage and regional GDP growth forecast between 6-7% in 2016, refined products demand growth is set to remain robust. At the same time regional refining capacity has declined, most notably with the closure of Kenya’s sole 70,000 b/d refinery in 2014. Whilst a number of new refining projects, most notably inland Uganda and in Kenya have been earmarked, it seems unlikely that any of these projects will come to fruition before the end of the decade, if at all”.

Gibson went on to note that “when assessing the demand prospects for product imports into East Africa it is important to look beyond the coastal states as a source of demand, with the key ports of Mombasa, Beira and Maputo serving as entry points for the landlocked interior nations of Zambia, Zimbabwe, Rwanda, Burundi, Uganda, South Sudan and Eastern parts of the DR Congo. Regional trade statistics are notoriously difficult to obtain and validate. Yet, analysis of Gibson clean spot fixture volumes into the region provides evidence of rapidly increasing demand, with 14 million tonnes of clean products fixed to Kenya so far this year, versus 12 million tonnes for the whole of 2014”.

Meanwhile, ‘exports from India and the Middle East dominate the market. However, the key to accessing the growing East African market is the control of the downstream storage assets needed to supply products to the interior markets. With storage assets in the hands of a few major players, it is increasingly difficult for new entrants to gain a foothold. Yet, new investment into storage and pipeline infrastructure may provide an opportunity for new players to enter the market”, Gibson noted.

According to the shipbroker’s report, “improved product infrastructure could also lead to a shift in the product mix. Currently diesel dominates as the main transportation fuel, yet demand for gasoline is rising faster. Furthermore improved pipeline infrastructure will see lower volumes hauled by truck, curbing the growth in diesel demand. However, with rising demand for gasoline in the Middle East and India, East African suppliers may be forced to seek supplies from further afield which would be beneficial for tonne mile demand. In any case, the demand side fundamentals for product imports into East Africa remain robust, and with improving downstream infrastructure, growing demand and limited refinery capacity additions, product imports look set to continue the impressive growth trend witnessed in recent years”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide