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The tanker sale and purchase market present an interesting contrast

The tanker sale and purchase market present an interesting contrast between buying activity and charter rates the first four months of 2024. While sales volume for tankers (>10,000 dwt) in the first four months of 2024 (187) is down 34% from the peak in 2023 (285), it's still 6% higher compared to 2022 (177). This suggests a wait-and-see approach from some buyers due to vessels’ high prices and despite a strong chartering market. Those strong fundamentals are evident in the significant increases in daily charter rates across all major tanker sizes (VLCC, Suezmax, and Aframax) on the Baltic Exchange. Compared to 2022, average Baltic Exchange TCEs for the first four months of 2024 have more than doubled in the VLCC sector (rates are up 178%), Suezmax rates are up 34%, and Aframax rates are up 48%, while Baltic MR Atlantic and Pacific rates are 73% and 156% higher. Compared to 2023 though, only VLCC and MR four months average rates are higher (25%, 5%, 11% respectively). Suezmax and Aframax have seen their average rates moving down 35% and 22% respectively. Although high prices are causing some investor caution in the tanker second hand market, the newbuild market is telling a different story. The overall tanker orderbook to fleet ratio, keeps increasing and has reached its highest level since May 2019 (9.6%). This surge is even more pronounced for product tankers, with the current orderbook to fleet ratio touching its April 2016 peak (15.1% vs. 15.5%).

Oil prices have surged in recent months, driven by a confluence of factors. Geopolitical tensions in the Middle East, particularly the conflict between Israel and Iran, have stoked supply security concerns. Additionally, refinery outages in Russia and production cuts by OPEC+ have tightened the market. This bullish sentiment is tempered by a revised global oil demand forecast from International Energy Agency (IEA). While growth remains positive, it has been downgraded slightly due to weaker-than-expected consumption in developed economies. World oil demand growth continues to lose momentum with 1Q24 growth of 1.6 mb/d, 120 kb/d below March’s forecast. This trend is expected to continue, with non-OECD countries like China leading the demand increase in the coming years. The supply picture is also undergoing a transformation. OPEC+'s production cuts have opened the door for non-OPEC+ producers, especially in the Americas, to take the lead in meeting global oil demand growth. For 2024, global output is forecasted to rise by 770 kb/d to 102.9 mb/d. Non-OPEC+ production will expand by 1.6 mb/d, while OPEC+ supply could fall 820 kb/d if voluntary cuts remain in place. This trend is likely to continue in 2024 and 2025, with countries like the United States, Brazil, Guyana, and Canada projected to see record-breaking production levels. The combined effect of these factors is a potential surplus of supply over demand in the near future. This could lead to a decline in OPEC+'s production role and create a substantial buffer of spare production capacity. In essence, the oil market is entering a new phase. While prices remain high due to current disruptions, a slowdown in demand growth and the rise of non-OPEC+ producers could reshape the market balance in the coming years.

Finally, last week the US Federal Reserve signalled borrowing costs will stay at 5.25 per cent to 5.5 per cent - a 23-year high that has been in place since the summer of 2023 - for an extended period to fight inflation. While no immediate rate hikes are planned, achieving their 2% inflation target will likely take longer than expected, delaying potential rate cuts until at least the second half of 2024.

Sale and Purchase

Dry:

Recent dry S&P activity shows a buying focus on the Kamsarmax/Panamax sectors, with nearly half of sales belonging to these categories. The Kamsarmax “Oasea” - 82K/2010 Tsuneishi Zhoushan was sold for USD 20.25 mills to Greek buyers, while Turkish buyers acquired the Panamax “Magic Vela” - 75K/2011 Penglai Jinglu for USD 16.5 mills. In the Panamax sector, buyers showed a stronger preference for older vessels, with the “Chailease Glory” - 77K/2003 Imabari changing hands for USD 11 mills basis TC attached till July- October, while the Ice Class II “AC Shanghai” - 75K/2001 Samho was sold for USD 8 mills to Chinese buyers basis DD due. On the Ultramax sector, Turkish buyers acquired the “Florentine Oetker”- 63K/2017 Imabari for USD 33 mills. Last but not least, the Handysize “Khoi” - 28K/2010 Imabari found new owners for USD 10.7 mills basis delivery 10-20 May.

Wet:

The tanker S&P activity was subdued, with only five sales reported, and nearly all of them belonging to the MR2 segment. Clients of Coral Shipping acquired the Scrubber fitted MR2 “Stavanger Pioneer” - 50K/2019 Hyundai Vinashin for USD 48 mills, while the 4-year older Scrubber fitted “Sti Manhattan” - 50K/2015 SPP was sold for USD 41 mills to clients of KSS Lines. On the same sector, the “Petronilla”- 49K/2005 Daewoo found new owners for USD 16.3 mills. Finally, the Chemical tanker “G Bright”- 20K/2004 Kitanihon changed hands for USD 15 mills basis SS/DD passed.

Xclusiv Shipbrokers Inc.