“All crude sectors are already recalibrating sharply lower and there are some very dark clouds on the horizon for the tanker market,” commented London tanker broker EA Gibson in its most recent market report. VLCC rates plunged across the board last week, with an average decline of about 40% across main trade lanes.
Many flights to China have already been cancelled, Gibson noted, questioning whether the same could happen in the tanker sector. The coronavirus has infected 17,200 people in China with 361 deaths reported.
Meanwhile, the re-emergence of Cosco Dalian vessels, as a result of the successful phase 1 of the US/China trade pact, could have a detrimental impact on tanker rates in the months ahead. A further negative is the uncertainty over decarbonisation regulations which, Gibson said, is curbing new contracting.
On the flip side, a relatively small number of VLCC orders in 2019 will ensure a period of limited fleet growth, according to the broker. The VLCC orderbook is equivalent to less than 10% of fleet capacity, a relatively manageable number. Searching for other positives, the broker suggested that tankers could be subject to Chinese port delays in the coming weeks which could have an impact on tonnage supply.
Read all Seatrade Maritime News coverage on the impact of the coronavirus on shipping
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