Crude tanker contracting in 3Q20 lowest since 2016

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By Claire Grierson, Director SSY Tanker Research


The contracting of crude tankers (Aframaxes up to VLCCs) in 3Q20 was the lowest volume by number of ships since early 2016.

This followed a jump in ordering from 3Q19 to 1Q20 that was largely spurred by the surge in crude tanker earnings. The 3Q20 contracting fall has mirrored the plunge in TCE earnings. But tanker contracting has also stalled because owners are now faced with taking decisions on what ship specifications to choose to meet greenhouse gas (GHG) emission targets set by the International Maritime Organisation (IMO) to achieve a 40% reduction in the carbon intensity of the shipping fleet by 2030 and to reduce total greenhouse gas emissions by at least 50% (from 2018 levels) by 2030.

Shipowners have been reluctant to order, in part as they have been awaiting IMO guidance on regulatory requirements to meet these targets. The IMO has just agreed (in late October) short-term measures but these are now in the stage of waiting for approvals. Still, one of the biggest concerns for shipowners is whether the technology they choose on new tankers becomes obsolete in a short period of time if further GHG regulations are mandated, while there is no clear direction yet on what the fuel of the future will be. That may continue to limit contracting near-term along with the current weakened spot tanker earnings environment.


Source: SSY, IHS Fairplay (TCE earnings quarterly averages)


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