According to MOL calculations based on Clarksons Research, the tanker segment is having a tough time. VLCCs operating between the Middle East and Japan are at their historical low with the average freight rate having decreased from $52,960 per day in 2020 to $3,400 per day in January-May 2021 (it was even negative in March).
Similar situation is in the segment of product carriers although the difference is not so drastic: some $15,000 per day in 202 and $6,500 per day in January-May 2021.
As David Fyfe, Chief Economist, Argus, told at the Argus Crude 2021: Global and FSU Markets webinar, some 70% of oil reserves accumulated over the past year have been consumed. Therefore we can expect the demand recovery to some 5.5 million barrels per day but the pre-pandemic level can be only reached in 2023. Meanwhile the recovery process is different in various regions of the world.
In this context it should be noted that domestic tanker operator Sovcomflot continues demonstrating stable development during the period of low freight rates in the tanker segment. In April 2021, S&P and Fitch upgraded the rating of SCF Group to ‘BBB-'. SCF is the only global shipping company engaged in energy transportation which is rated by the three leading rating agencies (S&P, Fitch and Moody's). Most of other companies operating in similar segments (NYK, MOL, BW, Teekay, Stena) are below the investment grade. According to Sovcomflot, positive trend was driven by continued growth of the industrial business segments while the performance of the conventional tanker business is still under strong negative pressure amid the challenging situation in the spot market.
In general, consensus forecast of the industry analysts says that oil demand can rise in 2021 due to the measures undertaken by OPEC and to environmental initiatives in the USA hindering the growth of shale production. So, the tanker segment can be expected to recover by the end of the year although unpredictable situation with the coronavirus expansion continues affecting the economy.
The situation in the market of dry bulkers is different. It is, on the contrary, is experiencing a considerable growth of the rates with the average BDI in January-May 2021 having increased to 2,123 versus last year’s 1,056. Freight rates in the segment have doubled on the average depending on the type of ships.
Freight rates in the market of container ships are also surging, especially on the European directions. That, probably, should be attributed to the release of pent-up demand accumulated over the last and the first pandemic years.
This, the year of 2021 seems to offer favorable conditions for shipping although the pandemic-related uncertainty poses certain risks.
The recovery trend is particularly confirmed by the increase of bunker prices. From spring 2020, bunker prices have recovered from the level below $200/MT to $400/MT for HLSFO and $500/MT for VLSFO, that is twice as much or even more.
As for bunker sales, the statistics of Singapore demonstrates the dominance of low-sulphur fuel oil, primarily LSFO 380.
Nevertheless, the economic growth is asymmetric and the IMF expects the economy of the developing countries, key consumers of energy resources, to be 4% below the pre-pandemic outlook even in 2024.
Detailed information on the Russian market of bunkering services will be covered at the 14th All-Russian Forum "Current State and Prospects of Development of the Russian Bunkering Services Market"