The Product Tanker Market

Analysis Creates Expertise

Outline

The product tanker industry is cyclical and volatile, resulting in fluctuations in the rates charged for Hafnia’s vessels. Fluctuations in rates, result from changes in the global supply and demand for tanker capacity and changes in the supply and demand for oil and oil products.

As this simplified tanker market overview shows, the charter rates and product tanker capacity depend on a number of factors:

  • The number of new tanker vessels being delivered and the number of vessels being recycled
  • The number of vessels that are out of service or undergoing repair
  • The refining throughput and the price of oil and oil products
  • Environmental regulations
  • Geopolitics

While crude tankers transport crude oil from points of production to oil refineries or storage locations, product tankers can carry both refined and unrefined petroleum products, including crude oil, as well as fuel oil and vacuum gas oil (dirty products) and gas oil, gasoline, jet fuel, kerosene and naphtha (clean products).

The charter market is highly competitive and based primarily on the offered charter rate, the location and technical specification of the vessel and the reputation of the vessel and its manager.

Freight and hire rates for product tankers trading under spot charters are very sensitive to fluctuating demand for and supply of vessels, and rates are consequently volatile. Rates are also strongly affected by seasonal fluctuations in demand from end consumers. While trends in the product tanker market are heavily impacted by product tanker supply and demand trends, typically market conditions have also been well correlated with crude oil tanker market developments, partly reflecting the fact that some crude and products tankers have the potential to act as ‘swing tonnage’ between the crude, dirty and clean markets.

Product tanker asset values have also fluctuated over time, and there is a relationship between changes in asset values and the charter market. New build prices fell significantly between 2008 and 2010, primarily as a result of lower global contracting activity. Prices increased in 2013-14, before softening across 2015-16. Since mid-2017, new build prices have risen once more, and by the end of September 2019, the guideline new build price for an MR stood at $36.5 million, still below the mid-2008 level of $53.5 million.

Hafnia Guangzhou leaving Guangzhou Shipyard on her maiden voyage.

Freight and hire rates for product tankers trading under spot charters are very sensitive to fluctuating demand for and supply of vessels, and rates are consequently volatile. Rates are also strongly affected by seasonal fluctuations in demand from end consumers. While trends in the product tanker market are heavily impacted by product tanker supply and demand trends, typically market conditions have also been correlated with crude oil tanker market developments, partly reflecting the fact that some crude and products tankers have the potential to act as ‘swing tonnage’ between the dirty and clean markets.

Product tanker asset values have also fluctuated over time, and there is a relationship between changes in asset values and the charter market. Newbuild prices fell significantly between 2008 and 2010, primarily as a result of lower global contracting activity. Prices increased in 2013-14, before softening across 2015-16. Since mid-2017, newbuild prices have risen once more, and by the end of September 2019, the indicative newbuild price for an MR was USD 36.5 million, still below the mid-2008 level of USD 53.5 million, before softening marginally to USD 35.5 million at the end of January 2020.

Rates are strongly affected by seasonal fluctuations

2019 – Reflections

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Merger, Private Placement and Listing

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