Do changes in trade flows impact the tanker market?

Jul 20 2018


Poten & Partner’s weekly opinion piece recently looked at nearly five years of crude oil trade data (2014 –2018) to see if any interesting trends or developments could be seen.

Are certain segments growing faster than others? How about shifts in export or import regions. Was anything noticed that was not expected?

 

First, the overall crude oil and dirty product trade for 2014-2018 was examined. To make the earlier years comparable with 2018, Poten looked at only the first six months of the year.

 

The data showed that the dirty tanker trade steadily grew during 2014-2017, increasing almost 5% in the first six months of 2015 and still growing 2.2% and 3.3% in 2016 and 2017, respectively.

 

However, in 2018 to date, the total dirty tanker trade (measured in tonnes) was down  1.3% compared to the same period one year ago (tonne/miles:-1.6%).

 

In Asia, modest increases in China and India could not compensate for declines in Japan and Asean countries, so overall tonne/mile demand from Asia was down 1%.

 

The biggest decline in import demand, however, came from the US (-15%). On the other hand, US exports were one of the few bright spots this year to date, with tonne/mile demand more than double that of the same period last year. The long-haul trade to China was responsible for almost 60% of that increase.

 

A review of the largest trade routes confirmed the changes in crude flows. The largest VLCC route was from the Arabian Gulf to the China Sea (China, Taiwan, South Korea) and this has not changed since 2014. This route, which is more than twice the size of the next route (AG –Japan), represents some 30% of the total VLCC trade.

 

However, the AG –US Gulf trade, which ranked No 4 in 2014 declined both in absolute and relative terms. Its volume fell by 33% and it now only ranked sixth.

 

In contrast, the US Gulf –China Sea VLCC trade currently ranks nineth. This trade did not exist prior to 2017. This increase in USG VLCC exports coincided with a decline in Venezuelan exports.

 

Another VLCC trade that has been in decline recently (and quite volatile overall) is that from AG to Europe. After a 55% increase from 2016 to 2017, this trade has fallen by 42% so far this year.

 

Moving onto the Suezmax segment, this trade has developed differently from VLCCs.

 

Suezmax employment has increased steadily since 2014, with a healthy 5% increase thus far this year.

 

A lot of Suezmaxes are employed in shuttle trades offshore Brazil (No 1 in the ranking) and in moving Alaskan crude to the US West Coast (No 3), but these trades are not growing and generate relatively little tonne/mile demand, due to the short distances involved.

 

The same applies to the second largest trade - AG to India.

 

A growing Suezmax trade is the AG –Southern Europe, but this is to a large extent driven by rising exports from Iran, which could be in jeopardy in the second half of this year, due to US sanctions.

 

West Africa exports have been relatively stable in recent years after significant volatility in 2014 –2016.

 

Thus far this year, Suezmax trades from the AG, West Africa, the Black Sea, the US Gulf and from the UK/Cont were growing, while trades originating in the Far East, the Eastern Med and Venezuela were struggling.

 

In the Aframax segment, the intra-Asean Far East (including Indonesia, Thailand, Malaysia, Singapore, etc) has overtaken the Caribbean market as the largest Aframax trading area.

 

Another Asian Aframax trade that is growing in importance is the exports out of Kozmino to China, South Korea and Taiwan.

 

Thus far in 2018, this is the third largest Aframax route (in tonnes), recently overtaking certain trades in the North Sea and the Mediterranean.

 

Overall, Aframax employment is down thus far this year versus 2017 in terms of number of voyages, and barrels moved, but tonne/miles are slightly up, as average distances increased.

 

In total, crude oil tanker demand has been relatively flat and rates are down as a result of increases in fleet size. However, there are a lot of developments hidden under the surface that belie the relative stability of aggregate tanker demand, Poten concluded. 

 



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