From the News Desk: Tankers on fire and the future in flux
Our regular round-up of the stories behind the headlines and a timely call to celebrate the innovators, the visionaries and the success stories in shipping
With the energy markets in flux and so many macro-economic unknowns colouring daily decisions there is an overwhelming need to make sense of it all. Well, don’t worry, we have you covered — take a read through our expert analysis of the current tanker spike and then book yourselves into a selection of the Lloyd’s List Outlook events coming up
LAST week’s rapid succession of tanker rate headlines saw very large crude carriers hit $100,000 per day only to be amended with a $200,000 update mid-week.
By Friday the headline read $300,000.
An apparent attack on an Iranian suezmax in the Red Sea carrying 1m barrels of crude was the headline that grabbed the mainstream media attention focused on security implications. But this was only the latest incident in a near perfect storm for the crude tanker market and more than mere Middle East security premiums at work.
Previous tanker attacks earlier this year followed by the Grace 1/ Stena Impero storylines and then the September 14 attack on Saudi Arabia’s oil infrastructure had already raised risk and set the security agenda for the world's biggest oil producing basin and energy transit chokepoint. But it is sanctions that have really starting to move rates as the available pool of vessels not falling foul of various US hit lists becomes ever smaller. A substantial portion of the internationally trading ships owned by Cosco are still considered “difficult” to trade following the US sanctions on Cosco’s subsidiaries two weeks ago.
Meanwhile major charterers, initially including Unipec and ExxonMobil, but also now Trafigura and Equinor, are now shunning any vessel that has had any links with Venezuela in the past 12 months following a tightening of US restrictions there. The net result of such sanctions shenanigans effectively means that a fifth of the trading VLCC fleet, just over a sixth of suezmaxes and about 10% of the aframax/long range two fleet are now considered off limits for international trade.
And then there’s the 2020 factor to consider. A growing proportion of the fleet is tied up in yards or floating storage for 2020. According to one estimate around 1.5% of the fleet is currently undergoing scrubber retrofits and a further 6% is due to head that way before the 2020 deadline on low-sulphur fuels kicks in.
Few things are stable in such markets and we have already seen large tankers sailing away from booked scrubber fittings to cash in while the 100% premium in the dirty markets has already prompted some clean tanker owners to try to cash in by switching to dirty. That in turn is now reducing clean-trading tanker supply and the near all-time highs in the dirty market is nudging-up clean tanker rates as well now. Nobody is expecting this to be a sustainable situation, but buckle-up because it promises to be one hell of a ride while it lasts.
Time for shipping to stick to its knitting?
We couldn’t let the tanker market have all the fun this week, so we recommend a quick look at the latest statements from those at the top table in the box sector right now by way of balance.
Given the volume of thought leadership and strategising about digitalisation and supply chain integration that has occupied the container sector’s top table over recent year you could be forgiven for wondering if shipping companies actually want to be shipping companies any more. It seems the buzzword bingo that has occupied European conferences has not yet made its way out to Beijing, because Cosco thinks the idea that a few big fish can go about removing all the smaller players that currently occupy the logistics chain is a wholly misguided ambition.
While Maersk and CMA CGM are looking to integrate themselves with the broader logistics chain, there are other who espouse a more traditional approach. Cosco, it seems are positioning themselves as the centrists. The third way if you like. According to the Chinese state giant’s container shipping head Wang Haimin it’s the logistics industry that needs more openness and co-operation about the way it works in order to improve service to customers.
In other container news this week we would highly recommend that you find out why Idan Ofer has placed a $3bn bet on 15,000 teu LNG powered boxships being more attractive that the big beasts, why leading freight forwarder Kuehne + Nagel is extremely cautious about securing long-term contracts into 2020. It’s also worth understanding why the disconnect between supply and demand fundamentals and freight rates is indicative of a return to predatory pricing on the part of some carriers within the trade.
Get your diaries out – here’s your agenda until 2020
The run-up to the end of the year and beyond into 2020 is going to be a frantic period for everyone, so we’ve been thinking carefully about the market outlook for the coming 12 months and how best to make sense of it all. In addition to the regular daily markets insights and our weekly and monthly menu of special reports, the Lloyd’s List team will be putting on some live events where we will be bringing in some of the smartest minds in the business to discuss the key trends shaping shipping over the next year and beyond.
All these events are free to attend, but space is going to be limited so all we ask is that you register via links below.
We start this week in Singapore where our editor Richard Meade will be hosting the Asia Trade Outlook Forum: How to plan for a future in flux. It’s on Thursday, October 17 from 9.30am-11.30am at the Tower Ballroom in the Shangri-La Hotel. Given the current events in the tanker trades we would humbly suggest that a couple of hours of expert economic analysis is going to be time well spent this week. It’s also the Lloyd’s List Asia Pacific Awards that evening, so if you haven’t got a ticket for the event of the season get in contact with Arundhati.Saha@informa.com now and we will try to squeeze you in.
While you have your diaries out, can we also request that you consider these dates as well:
Forum: Ending misdeclared cargo. November 14, Royal Lancaster Hotel, London, 1.30pm-3.30pm.
The Smart Ports Forum, held as part of the Lloyd’s List South Asia, Middle East & Africa Awards, November 20, Jumeirah Beach Hotel, Dubai.
Hong Kong Innovation Forum, November 20, Hong Kong Maritime Museum, 3pm- 6.30pm.
Outlook 2020 Forum, December 10. Breakfast meeting: Hilton Park Lane, London.