1. Condition and tendencies of the tanker market
Evgeniy Dolgikh
Condition and tendencies of the tanker market
II Baltic Oil and Gas Week
29th October 2014, St. Petersburg, Russia

2. TANKER MARKET AT A GLANCE
The crude tanker market is in better shape than a year ago.
Market is still suffering from massive oversupply.
Tanker industry (as well as the whole shipping industry) is undergoing a process of transition driven by a combination of technological advances related to fuel efficiency and environmental requirements.

3. TIMECHARTER RATES ARE UP, BUT REMAIN LOW IN A HISTORICAL PERSPECTIVE

4. Aframax Earnings 2014 vs 2013

5. Suezmax Earnings 2014 vs 2013

6. VLCC Earnings 2014 vs 2013

7. World seaborne oil trade

9. DEMAND SEABORNE CRUDE OIL TRADE IS DECLINING.
The main reason for this decrease was that both North America and Europe reduced imports of crude oil, albeit for very different reasons.
The decrease in US and European crude oil imports from West Africa has made the crude oil available to the Asian market instead.

10. SUPPLY
Tanker fleet development in million tons DWT

11. SUPPLY
Order book in percent of existing fleet ‐ Tankers in excess of tons DWT

12. SUPPLY Newbuilding contracting activity is being warmed up by
Vast shipyard capacity
Low newbuilding prices
Support from local export credit agencies

13. SUPPLY
Investments in Shipping

14. Average newbuilding price 12% above the low of 2013

15. Average scrapping age continues to decline

16. Pressure from environmental requirements
SOx (MARPOL Annex VI)
NOx (MARPOL Annex VI)
Ballast Water (BWM Convention)
Recycling (Ship Recycling Convention)
CO2 (MARPOL Annex VI)

17. From the sulphur content allowed in the Emission Control Areas (ECA) will decrease from the currently allowable 1% to 0.1%

18. ECAs: Cost of Compliance
In practice (obviously dependent on bunker prices at the time) there are estimates that an Aframax doing a cross North Sea voyage will incur an additional cost in excess of $100,000 basis a round voyage of 9 days.

19. Economic Pressure
Based on Aframax tanker, 1 year TC rate and Rotterdam bunker price

20. Increasing the performance of existing vessels

21. OUTLOOK
Fleet growth is unlikely to exceed 2% p.a. on average through 2016 (1/3 of the average growth rate seen between 2009 and 2013).
Changing trade dynamics and longer travel distances could potentially absorb the increasing inflow of vessels.
The crude tanker fleet is young and premature scrapping seems inevitable if future supply outperforms demand by a large margin.

22. Thank you for your attention!