"Tankers are the frontline of the logistics supply chain. If you don't have the tankers with the fuel to fuel everyone, you'll never get your Alibaba delivery," said Mr Tim Huxley, moderator of the maritime forum, Hear from the experts: Outlook for Tanker and Gas Trades at the fourth Asian Logistics and Maritime Conference (ALMC).
The session discussed how the world's oil and gas trades were being both driven by global economic growth and suffering a dislocation between consumption and production.
Four industry experts shared their thoughts on the tanker and gas trades, including Mr Henrik Hartzell, Managing Director of Heidmar's Far East division; Mr Henry Curra, Co-Head of Research for Braemar ACM Shipbroking; Ms Stavroula Betsakou, Head of Tanker Research for ICAP Shipping Limited; and Ms Selena Yan, Senior Analyst at Clarksons.
What drives the tanker market?
According to Mr Hartzell, the primary driver of the tanker market was the simple relationship between supply and demand. "First the supply of tankers and then the demand of seaborne oil," he noted, observing that the current supply of tankers had increased to almost double the demand of oil.
The key factors affecting the tanker market were then divided into two categories, long-term and short-term factors. Long-term factors included sanctions, seasonal influences, geopolitical factors, and upcoming macro factors.
Short-term factors, meanwhile, were more plentiful, and included changes in trading pattern of oil, changes in speed, short-term spikes in demand, fundamental mechanics in the markets, refinery overhaul, and factors such as weather delays.
Whilst the elements required in achieving a profitable tanker business were identified (including building against term contracts, successfully playing the spot market, buying low and selling high, maintaining excellent personnel teams, and knowing both the competition and the market), it was noted that success in the tanker market was never guaranteed – even with the utmost planning and flawless execution.
Ultimately, the shipping industry remains very unpredictable, with incidences such as the September 11 terrorist attacks, the 2004 boxing day tsunami, and worker strikes all having significant impacts on the industry.
Freight markets: A new set of controls
Mr Henry Curra then shared eight elements he believed were unique to the current state of the market: Interest rates, "wishful thinking", "zombie companies", China, North America, LNG, oil prices, the swing market, and traders.
Mr Curra opened with his thoughts on interest rates, observing how tanker markets had not been strong since 2008. However, recent months had seen a slight rejuvenation in the segment, he continued. Mr Curra believed interest rates were a primary driver for this change.
For the freight sector, two markets were highlighted for their independent contributions: China and North America. The importance of the Chinese market might be waning a little, claimed Mr Curra, highlighting how the country's current consumer phase and so-called "soft landing" was proving to be a much less energy intensive phase of the country's growth. However, the market remained very important. Alongside India and other Asian markets, China's future contribution was very significant.
For North America, the shale revolution had transformed their economy and delivered a massive increase in production for tankers. The USA is now the leading exporter of refined products, which has subsequently reshaped the trading scene.
Mr Curra went on to explore the fact that oil prices have come down, and the clear implications this has for much of the industry. He closed by sharing his belief that traders were important influencers on the market, often with a unique view of the business.
Crude Tanker Market Outlook
Ms Stavroula Betsakou focused on sentiment for her discussion on the crude tanker market outlook, forecasting that 2015 will be a positive year for crude tankers.
Moving to 2016, the market will be balanced, but warned if more crude tankers are ordered the industry could revert back into recession.
Ms Betsakou cited growing tanker trades and regional developments, along with the growth of supply in the Atlantic and growing demand in the East. There are a lot of new markets and trades opening up, meaning a lot of oil being shipped around, she said. Further, it is predicted that the USA will soon start exporting crude to relieve the country's current oversupply.
On the topic of older tonnage verses order books, Ms. Betsakou said she doesn't believe the industry speculation that tankers over 15 years old will be scrapped. She predicts the reality will be closer to tankers of 20+ years in the VOCC sector, and that these will be ready for scrapping by 2018, coupled with some of the inefficient 15-20-year-old ships.
Game changers in the product market
Ms Selena Yan, Senior Analyst from Clarksons, said the product market will be more positive than the crude trades going forward.
Ms Yan explored the topic of Australian refineries and their impact on the global industry. Until recently, Australia had seven refineries, but two have recently been closed, with another due to close next year.
This development will have significant impact for the worldwide product market, as the closures mean a likely increase of product imports into geographically remote Australia. Australia's far-off location and increased demand potentially means more long haul opportunities are opening up, with a potential increase of up to 230,000 barrels a day.
On China VLCC groups
During the Q&A session, Ms Betsakou shared her thoughts on China's VLCC groups. "Only 20 ships have been made by China and I don't see it as a detriment to the market," she said.
With the Chinese government supporting the industry and many Chinese investors not wanting to see the market collapse from oversupply, Ms Betsakou suggested there might be some scrapping of older Chinese tonnage.
Switching tracks to VLCC pools, Ms Betsakou said that pools benefitted primarily from inconsistencies, and reinforced her earlier explanation that spikes in the industry were not a true benchmark or reflection of the sector.
The current product tanker market was a side effect of a rush of activity from August, she said, with many one-off factors contributing. Thus, the market will calm down again, with a natural drop forecasted for the first quarter and the product market likely to "come back down".
