Poten's Weekly Opinion: Demolition Derby

May 13 2021


Will scrapping hold the key to the tanker market recovery?

The tanker market has been in the doldrums since the summer of 2020. There are simply too many ships available for the limited number of cargoes that need to be shipped. While the main cause of the current crisis in the tanker market is unique, the crisis itself is not. The tanker market is cyclical, and we have seen periods of depressed rates many times in the past. While we are still dealing with the Covid-19 pandemic in many parts of the world, there are a growing number of areas where oil demand seems to have turned the corner (China, the United States and parts of Europe).

 

However, this regional demand recovery remains tentative. It has not led to a material increase in seaborne oil flows and by itself will not drive tanker rates higher in the near future. For that to happen, we need adjustments to tanker supply as well. In the short-term, owners have a few levers that they can pull: slow steaming (effective, but temporary); delay scheduled deliveries and increase demolition. This week our focus will be on demolition.

 

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