Current conditions in the Very Large Crude Carrier (VLCC) freight market are not entirely attributed to seasonality, according to Maritime Strategies International (MSI), instead, MSI says dynamics reflect lower rates of crude import growth across the year combined with reduced waiting times and much higher deliveries.
The impact of much higher fleet growth this year is being amplified by the slowing demand environment. Importantly the market has also ‘returned to normal’ with respect to congestion with little support from port delays compared to earlier in the year. MSI expects the supply-side to be the dominant theme for the large crude sector well into 2017 and its forecast view for earnings remains under pressure.
A combination of factors are expected to continue to impact the crude market this year.
“We are seeing a step change in delivery volumes this year, concentrated in the larger crude and products segments. Notably we have yet to see any increase in scrapping activity to counteract this, but we do expect this to pick up in H2 and 2017,” MSI Senior Analyst Tim Smith said, adding that “the market is now operating under ‘normal’ conditions with regard to congestion and bottlenecks which were prevalent and constructive feature for freight rates earlier in 2016.”
Spot forecast for the Suezmax segment pales in comparison to the previous two years’ winter markets. MSI said that, while some uplift is expected, gains are muted.
Lower levels of supply-side pressure on the uncoated Aframax segment could alleviate weaker demand conditions but MSI expects the segment’s freight market to continue to broadly track its larger peers.