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‘Further and solid improvements’ ahead for tanker markets

Photo: AET AET VLCC sailing
Supply and demand fundamentals for tanker markets look good through 2023 but could be shaken by global recession, according to Bimco.

In its Q3 Overview and Outlook for the tanker market, Bimco said the Baltic Exchange Dirty Tanker Index had been up an average of 86% on-year in 2022, and the clean tanker index had been up 113% as the markets were supported by higher tonne-mile, 5.1% higher for dirty and 2.9% for clean.

Bimco said the EU’s ban on imports of Russian oil and products was supportive for the tanker market and helped to drive its forecast of 5% demand growth in 2022 and 2023.

Fleet growth was expected to lag demand growth, further supporting the tanker sector.

“Contracting has remained very low during the first seven months of 2022. Crude tanker contracting is the lowest in our records that date back to 1996, while product tanker contracting is the lowest since 2011. Relative to the size of the fleet, the order books now stand at 4.7% and 5.4% for crude and product tankers respectively,” said Bimco.

Fleet growth is expected to be limited further by upcoming environmental regulations, which may well lead less energy efficient vessels to travel more slowly, effectively reducing available tonnage supply.

“We forecast crude tanker fleet growth of 5.4% and 1.7% in 2022 and 2023 respectively, whereas product tanker contracting is forecast to grow by only 1.0% in 2022 and 0.9% in 2023,” said Bimco.

The strong fundamentals remain at the mercy of global economics, however, as various organisations revise down their forecasts of world growth.

“Since our update in June, the risk of a global recession has increased and activity in China still disappoints following the extensive COVID lockdowns,” said Bimco.

While uncertainties remain, everything points towards a solid strengthening of both the crude and product markets in 2023, and higher freight rates, time charter rates, and second-hand ship prices.