Product Tanker Sector: The Safest Bet Are MRs

Medium ranged product tankers (MRs) are definitely the workhorses of the product tanker shipping industry, being the most widely used vessels that can call at any port in the world including smaller and shallower ports, it was concluded during a webinar organized by Capital Link Shipping on June 1.

MRs, capable of carrying multiple cargoes ranging from clean petroleum cargoes, easy chemicals up to edible and vegetable oil, are the most attractive vessels in the product tanker sector at the moment, the panelists said.

” I think that the safest bet is in the MRs,” Marco Fiori, Chief Executive Officer d’Amico International Shipping S.A said. “ They have proven over and over to be the most flexible ships… These ships also have a very good second life with vegetable oils, with other products that are not CPP.”

“So, considering what is going on in the world regarding the new geographical structure of seaborne product trades because of the new refinery capacity added, et cetera, we think that the vessel that we have benefited most in the product tanker industry, will be the MR, “ Eddie Valentis from Pyxis Tankers said.

“Asset values are very attractive at this stage. Owners should look at the second-hand market. The values currently are way below their 10-year average at approximately 30% below their ten-year average. So, it’s a nice attractive entry point for MRs,” he added.

Speaking of the current market conditions and the sector’s outlook, Kim Ullman, Chief Executive Officer Concordia Maritime, described the current situation as the “start of the low”.

“We had a second half of 2016 that was not very good. We had an okay Q1. We did at least over 14,000. But Q2 and Q3 looks exceptionally challenging, I have to say. There will always be small spikes of course,” he added.

As explained, the reason why it is a start of the low is that the inventories are full and with full inventories all arbitrage opportunities are killed. This is in addition to the fact that ships “are flooding the market.”

“With the field inventories, arbitrages die, ships are stuck in the same positions and as soon as they have been fixed, they are open again,” Ullman said, adding that what is needed in the medium to longer term is to get rid of the inventory overhang, which is likely to take another two to three-year quarters at least.

“We see the market coming up from sometime next year. “

According to Valentis, things look very positive for the market going forward.

Among the reasons ascribed to that are the projected demand growth for refined products in the region of 2.5% to 3% annually, a modest ton-mile expansion from the changing refinery landscape and a record low orderbook and very little new orders going forward.

In addition, owners are confident that there would be heavier scrapping seeing that in the MR sector approximately 13% of the fleet is over 20 years of age.

This is also expected due to the new environmental regulations such as the introduction of ballast water treatment systems from September this year and the lower sulfur emissions which is coming in 2020.

Therefore, these two catalysts might be a good opportunity for the market to recover.

” We believe that most definitely many owners will decide not to go through with that investment and especially regarding the sulfur regulation which is coming in 2020. Of course, we have a long way until then and we don’t exactly know what the situation is, but definitely it’s another major concern for vessels which are above 20 years of age,” Valentis said.

World Maritime News Staff