Investors need to “be patient” with crude tanker freight rates, which will endure “more pain” over the next 18 months before seeing an upturn in fortunes, Deutsche Bank has said in a research note.
The bank forecasts that by the end of 2017 the global crude tanker fleet will increase by 153 vessels (net) compared to the year-end 2015 level. Over the same period, the fleet’s carrying capacity will see incremental growth of 4.6m bpd on an annual basis.
Amit Mehrotra, Deutsche Bank’s lead shipping analyst, said the capacity increase “is well above even the most bullish near/mid-term demand expectations”.
Some 56 new crude tankers have been delivered since January 1 this year, the bank said. Another 97 are expected to arrive during the next 18 months, which will be equivalent to a 4.7% increase in the global fleet’s carrying capacity or 3.0m bpd on a voyage-adjusted basis by the end of 2017.
“As such we continue to forecast a loosening of crude tanker supply/demand fundamentals, which, in our view, continues to have negative implications for rates and asset and equity values,” Mehrotra noted.
So far this year, almost no new crude tankers have been ordered at shipyards, which Deutsche Bank said will lead to an upturn in rates in 2018 and 2019, despite weak market conditions over the next 12 months.
The global VLCC fleet will see a net increase of 3% in terms of deadweight tonnage by the end of 2017, Deutsche Bank said in its research. Similarly, the bank forecasts net increases of 5.5% for the global suezmax fleet and 1.6% for aframaxes.