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The week in charts: Tanker rates in freefall and trade outlook downgrade

After hitting record highs earlier in the week, reality kicks in for spot rates. Clarksons lowers growth forecasts for seaborne trade in 2020

Crude tanker rates are falling as fast as they rose as the record-breaking chartering spree seen earlier in the week winds down

THE TONNAGE frenzy that began 10 days ago led freight costs to increase 12-fold over four days and masked the coronavirus-led impact on global crude demand, which saw oil prices crash to a 17-year low.

Market reality now appears to have caught up with spot rates: average very large crude carrier earnings are 45% lower in two days, retreating from the March 16 record of $264,000 daily, Baltic Exchange indices show. 

Suezmax rates are also down 46% over two days, reaching $70,951 per day on March 19, Baltic Exchange data show. The tanker size was benefiting from higher VLCC rates as charterers split cargoes to secure cheaper freight, boosting demand.

Aframax earnings are next expected to fall, in line with larger sizes.

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Product tanker earnings have rallied in March on some routes, although gains do not match those seen recently in the crude tanker market.

While earnings for long-haul voyages to Asia from the Middle East have doubled this month to as much as $41,000 daily, in the Atlantic basin, medium range tankers remain steady around the $30,000 daily level.

Owners and operators remain uncertain about the sustainability of any rises given that shipments of diesel, gasoline and jet fuel are likely to fall as the coronavirus outbreak continues to paralyse land and air transport.

Demand for jet fuel is hardest hit amid a drastic fall in aviation flights, with airlines worldwide suspending operations and laying-off staff as demand collapses. Airlines’ industry association IATA estimated losses at between $63bn and $113bn in a paper dated March 5.

 

Meanwhile, in a report released this week, Clarksons has reduced its forecast for total world seaborne trade in tonne-miles growth in 2020 by 0.9% to 2.1%. This compares with an estimate of a 3% increase compared with 2019.

However, it added that further downgrades are likely. A much bleaker case scenario, which takes into account the possibility of the coronavirus pandemic extending into the third quarter — alongside a global recession that includes broad economic impacts in Europe and the United States — and a drop in consumer confidence, would see negative growth of -0.2%.

The impact of declining global oil demand and refinery throughput means Clarksons has revised down its outlook for crude seaborne trade by 0.8% from last month to 3% growth from 2019, but added that an increase in supply from the Middle East and stock building at low prices could potentially offset the drop elsewhere.

For containers, given the segment’s significant exposure to the broader world economy, a fall in consumer activity and supply chain disruption means a negative outcome for the box trade is looking increasingly likely, Clarksons said.

It has revised down its outlook for container trade growth to 1.4% from 2.5% in February.

The biggest declines in expected growth are seen in the liquefied natural gas and liquid petroleum gas sectors, where seaborne trade is expected to be impacted by reduced demand from China combined with delayed LNG projects. Seaborne trade in cars is expected to see a 5% fall from last year as the market comes under pressure from the weaker global economy.

 

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