London: A slew of tanker newbuilds set to hit the world’s oceans next year should put a cap on the tanker bullrun, one of the world’s leading brokers tells Maritime CEO today. James Palmer is a partner at Simpson Spence Young (SSY) and heads up the broker’s tanker chartering department.
“We anticipate strength in tanker earnings to be maintained in the near-term given improved oil consumption due to lower prices and continued inventory filling,” Palmers says, noting how trade routes are lengthening as more crude moves from the Atlantic to Asia while expansion in refinery capacity East of Suez is increasing the volume of oil products moving west.
“Further growth in earnings could be capped from 2016 as fleet supply is set to accelerate, particularly for the crude sector,” Palmer warns. This is through a combination of newbuilding deliveries as well as the conversion to tankers of existing building orders for other vessel types, such as dry bulkers, where earnings have been comparatively weaker. There is also shipyard capacity available for even more new tanker orders to be placed from 2017.
SSY is not bullish on dry bulk, the brokerage warning there is the potential for China to record its first annual decline in its total dry bulk imports since 1998.
Shipbroking, as with many other parts of the shipping world, has undergone considerable consolidation of late, something SSY has watched from the sidelines with no intention of getting involved.
“It’s cyclical,” Palmer says of the current consolidation fad. “Businesses get too big to manage, fail to align with client needs, and/or employees’ aspirations then potentially break up again.”
SSY is different, Palmer says, since it is independent, owned by our partners, all of whom are active within the business.
“While we are certainly looking to expand we will continue to do so through strategic acquisitions and organic growth,” Palmer says.
“Consolidation between others will likely create opportunities for us – people who don’t want to be part of it, or feel they don’t fit, will look for other companies to work for, and we will be at the forefront of that. Possibly not everyone will agree with the dominant stakeholders in the merged entities,” Palmer reckons.