MJLF Research
Tanker Supply and Demand
Intertanko
March 17th, 2014
MJLF Research
Tanker Supply and Demand
1. Global Macro Picture
2. Dirty Tanker Markets
3. Clean Tanker Markets
4. Jones Act Markets
MJLF Research
Tanker Supply and Demand
GDP Historical and Forecast
Macro GDP Estimate
• Total global GDP is forecast to trend upwards
through 2014.
8
7
6
% Increase
5
• Emerging economies require more oil as their
GDP grows than advanced economies.
4
3
2
• Advanced economies are maintaining oil
demand despite expectations of tapering.
1
0
-1
Emerging
Advanced
World
Source: IMF
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Tanker Supply and Demand
Total Global Demand
Annual Global Demand
100
Projected
95
Million bbls/d
90
• Daily demand was at 92.1 mn bbls/d in January
of 2014.
• Total Global Demand is forecast to rise through
2016 to above 95 mn bbls/d, many of these
additional barrels will move on tankers.
85
80
• Peak demand is expected at approximately 100
mn bbls/d.
75
70
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: IEA
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Tanker Supply and Demand
Dirty Product
Tanker Markets
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Tanker Supply and Demand
Dirty Product Market Highlights
• US crude oil production is shifting markets and
creating new trade patterns.
• Chinese demand is the main driver of the VLCC
markets, however, OECD demand has been
stronger than expected in 2014.
• Seasonality of rates returned in 2013 after
weak markets in 2012, with all segments seeing
a substantial rate spike at the end of the
calendar year.
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Tanker Supply and Demand
Time Charter Rate Trends
28,000
30,000
1 Year
3 Years
28,000
26,000
26,000
24,000
24,000
22,000
22,000
20,000
20,000
18,000
18,000
16,000
16,000
14,000
14,000
12,000
12,000
10,000
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
10,000
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
MJLF Research
Tanker Supply and Demand
Fleet Size and Orderbook
Ship Type
Fleet Size
Orderbook
%
VLCC
631
88
14.1
Suezmax
494
47
9.5
Aframax
898
105
11.7
Panamax
416
22
5.3
MR
1395
300
21.5
Jones Act MRs
33
11
33
Source: Clarksons
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Tanker Supply and Demand
VLCC Fleet Age Profile
70
Projected
60
Current VLCC
Fleet Size
2013 Final - 631
Number of Ships
50
40
Projected Fleet
Size
30
20
10
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year Built
Source: Lloyds
2014 – 652
2015 – 657
2016 – 667
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Tanker Supply and Demand
VLCC Average Earnings
$100,000
2010
2011
2012
2013
2014
$100,000
$80,000
$60,000
$60,000
$40,000
$40,000
$20,000
$20,000
$/Day
$/Day
$80,000
$0
$0
Source: Clarksons, Wells Fargo Securities, LLC
MJLF Research
Tanker Supply and Demand
… But slow steaming is artificially capping the
supply of ships.
• During the late season rate
spike for VLCCs in 2013, few
owners expressed willingness
to abandon slow steaming.
• If there is a prolonged rate
hike, charterers may demand a
return to higher speeds.
Laden
Ballast
Slow Steaming
bbls Capacity Daily Equivalent
Days
Speed
21.9
12.5
37523
2,000,000
27.4
10
Laden
Ballast
Normal Speed
bbls Capacity Daily Equivalent
Days
Speed
18.87
14.5
47148
2,000,000
19.55
14
25.7% Increase in fleet capacity at full speed
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Tanker Supply and Demand
VLCC Ras Tanura to Chiba
140,000
• Fleet growth for larger tankers is
expected to be modest in the years
ahead as orders have been slower
in the crude sector.
120,000
TCE $/Day
100,000
80,000
• The rate volatility seen late in 2013
and in 2014 indicates a healthier
supply/demand balance is returning,
but the fleet remains very large by
historical standards.
60,000
40,000
20,000
J
F
M
A
Five Year Range
M
J
2013
J
A
2014
S
O
N
D
Average
Source: Baltic
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Tanker Supply and Demand
Suezmax Fleet Age Profile
50
Projected
45
40
Number of Ships
35
Current
Suezmax Fleet
Size
2013 Final - 430
30
Projected Fleet
Size
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year Built
Source: Lloyds
2014 – 446
2015 – 456
2016 – 456
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Tanker Supply and Demand
Dirty Product Trends
• Earnings in the first quarter of 2014 were impacted by global refinery turnarounds
which are averaging 2.8mn bbls/d from Dec 2013 to April 2014. HOWEVER, overall
runs are forecast to grow by 1.1 mn bbls/d (year on year) for the remainder of 2014
• Modest fleet growth in all dirty tanker market segments is positive for owners.
• VLCCs and Suezmaxes will continue to experience dynamic rates in 2014, but
average earnings will be only modestly higher than in 2013.
MJLF Research
Tanker Supply and Demand
• The completion of the Panama
Canal expansion is currently
scheduled for end 2015 (stated)
• The expansion will allow partially
loaded Suezmax tankers to transit
the Canal (110,000t-120,000t) and,
thus, could potentially pose a threat
to the VLCC sector.
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Tanker Supply and Demand
Clean Product
Tanker Market
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Tanker Supply and Demand
Clean Product Market Highlights
• Rising US Gulf distillate exports to Latin
America and Europe – US Refiners continue to
add marginal capacity.
• Growth in Asian and Middle East refining
supercenters will lead to closures of smaller,
inefficient refineries world wide.
• Between 750-900,000 bbls per day of refinery
capacity are slated for strategic review, ie
closure, in Europe.
MJLF Research
Tanker Supply and Demand
Current MR
Fleet Size
MR Fleet Age Profile
160
Projected
140
2013 Final - 1395
Number of Ships
120
100
Projected Fleet
Size
80
60
40
20
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year Built
2014 – 1468
2015 – 1577
2016 – 1602
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Tanker Supply and Demand
MR Average Earnings
$25,000
$25,000
2010
2011
2012
2013
2014
$20,000
$15,000
$15,000
$10,000
$10,000
$5,000
$5,000
$/Day
$/Day
$20,000
$0
$0
Source: Clarksons, Wells Fargo Securities, LLC
MJLF Research
Tanker Supply and Demand
• Earnings were close to five year
highs in 2013, but earnings have
reverted closer to the average.
Trans Atlantic Round Trip
35,000
30,000
TCE $/Day
25,000
• The US Gulf to Europe trade has
seen earnings above the Europe to
US Atlantic Coast run, which
historically did not happen.
20,000
15,000
10,000
• LR1s and LR2s have started loading
in the US Gulf.
5,000
J
F
M
A
M
Five Year Range
J
J
2013
A
2014
S
Average
O
N
D
MJLF Research
Tanker Supply and Demand
Clean Product Trends
• Panama Canal Expansion and the increase in the number of crude splitters
(producing a large amount of naphtha) could increase the number of cargoes
from the US Gulf to the Far East on LR1/LR2s.
• The fleet growth in the MR and LR2 segments is projected to be fairly large from
2016 onwards, which may limit the upside to rate increases.
• Abnormally cold weather in the US North East led to unexpected support for
Europe to US Atlantic Coast rates early in 2014 as distillates were sourced from
Europe.
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Tanker Supply and Demand
MJLF Research
Tanker Supply and Demand
Jones Act
Tanker Markets
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Tanker Supply and Demand
• US Crude Production
Crude Production
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Domestic Production
Jan-09
Jan-10
Jan-11
Jan-12
Source: EIA
Jan-13
Jan-14
MJLF Research
Tanker Supply and Demand
• USWC Rail Development
•
•
•
If all rail Terminals are
built, 800 KB/d of
capacity will be added
exceeding regional
refining throughput
Total USWC refining
capacity is estimated at
2.8 MMB/d, w/ 1.75
MMB/d of capacity in
California
As a result intra Pacific
Northwest-California
barge and tanker trade
are forecasted to expand
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Tanker Supply and Demand
•
Texas Production + Pipe-In Capacity
(Seaway + Cushing Market Link): 4.1
MMB/d
•
Pipe-Out Capacity: (HoHo +
Permian Express + Centurion): 835
KB/d
Texas Shale Production
(KB/d 2013 v 2020)
2750
2500
2250
2000
1750
1500
1250
1000
750
500
250
0
2013
Eagle Ford
Permian Shales
2020E
Barnett
Granite Wash
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Tanker Supply and Demand
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