BMI has a very bearish outlook for the global crude oil shipping sector in 2012, particularly toward companies with significant numbers of very large crude carriers (VLCCs) in their fleets, and especially those operating on the spot market. The global crude oil tanker sector is in crisis. Like the container and dry bulk shipping sectors, tanker operators are struggling against the effects of overcapacity. Vessels ordered during the predownturn boom years have continued to come online through 2011 despite the continued decline in rates, worsening the problem still further, and will continue to do so through the coming years.
In the Liquid Bulk Overview Q1 2012 we examine the global supply and demand outlook for crude oil and crude oil shipping, and outline what we expect will happen in 2012 and beyond. The first chapter is entitled Dirty Tanker Indices Not Very Buoyant , and in it we explain why we are bearish towards the Baltic Dirty Tanker Index and other indices in 2012, and examine their performance in 2011.
In Differing Strategies, Differing Fortunes , we examine how the world’s two largest tanker operators, Frontline and Teekay have had different levels of success in 2011 as a result of their different modi operandi, and explain how we believe this will continue in 2012 as they maintain their positions. While Frontline operates largely in the spot market, Teekay ensures a certain level of time chartered tonnage in its fleet.
In the following chapter, Genmar Bankruptcy Just The Beginning , we project that smaller companies will increasingly declare themselves bankrupt in 2012 as they face similar challenges to Frontline, only without the large company’s financial backing. Marco Polo Seatrade has already declared itself bankrupt, and General Maritime Corp (Genmar) has warned investors that it may have to do the same.
There are a number of methods by which operators can seek to protect their bottom lines in 2012, and these are examined in Survival Strategies For Floundering Tanker Operators . These include slow-steaming, laying-up and scrapping, the most drastic method, but also the one most likely to work.
However, in the following chapter we note that a Rumoured Chinese Order Has The Potential To Sink Crude Oil Shipping Sector as the huge glut of VLCCs it would bring onto the market in the mid term would cause rates to plummet.