Tankers that carry about half of the refined oil products transported by sea will lose money for the next five years as an oversupply of the vessels caps earnings, said McQuilling Services LLP.
Medium Range 2 ships hauling cargoes of 35,000 to 40,000 metric tons will lose as much as $1 million annually by 2016 and 2017 as operating costs exceed returns, the maritime consultancy said in its annual outlook for the tanker market. McQuilling, based in Garden City, New York, estimated earnings for five tanker types shipping both crude oil and refined products.
Very large crude carriers hauling Saudi Arabian oil to Asia, the industry’s benchmark route, will generate the highest returns in the 2013-17 period, the outlook showed. Earnings for MR tankers are under pressure from higher fuel prices and a looming oversupply as demand for oil-product vessels, which have drawn the most private-equity investment in shipping, contracts for a second year, according to McQuilling.
“Our optimism at present is limited to the dirty tanker sector, and the up market will be more subdued than previous market cycles,” the consultant said. Crude oil is referred to in the industry as dirty, while refined products such as jet fuel and gasoline are called clean.
VLCCs that were built in 2005 and ply the benchmark route will profit by $12,292 a day in the outlook period, the most money, according to McQuilling. Aframax tankers constructed in 2010 and carrying crude to the U.S. Gulf Coast from the Caribbean will have the worst daily losses at $9,765, the outlook showed.
The consultant assessed cash flows for tankers built in 2005, 2010 and last year. All MR vessels were projected to be unprofitable, even eight-year-old ships assumed to have paid off debts completely. MR tankers built in 2005 and voyaging to the U.S. East Coast from the Caribbean will lose $2,317 daily, McQuilling estimated.
Returns for MR tankers bound for the East Coast from Europe will fall to $5,900 a day this year from $7,200 in 2012 before declining for three more years to $4,800 in both 2016 and 2017, the outlook showed.
Shipyards received orders last year for 93 MR vessels, compared with 65 for all other tanker types combined, according to McQuilling. The glut also is likely to curb earnings for Long Range 1 and Long Range 2 tankers carrying as much as 90,000 tons of cargo, even as demand for the bigger ships strengthens, the consultant said.