2020 was such a fun year. Yet, Splash Extra still recalls that it was such a mess too – that anyone could say anything – and (almost) get away with it, because no one could claim with certainty that what they presented was the whole truth.
The regular season
What was the truth in 2020 for oil tankers? It was unheard of. Mostly because the wildcard weekend happened so early in the year. In fact, it became the perfect topsy-turvy year. We will get back to that.
In the meantime, Splash Extra argues that 2020 ought to have been a dreadful year haunted by low freight rates as previous years with an above par inflow of new VLCCs weighing heavily on the market. Then the OPEC+ alliance broke down. In many ways, the would-be-2020 might not have been much different to what we got once the wildcard weekend (March through May) was over.
Being inefficient remains the sacred strategy of the entire shipping industry
No one was sparking in the regular season. No loopholes appeared once the magic was gone. Still South Korean shipyards received orders for 28 newbuild VLCCs in the second half of 2020. Most remarkable was the Chinese-backed 10 VLCC order placed by Everest Korea, who splashed out $900m by mid-November.
One month later the Chinese competition authorities had no objections to the merger of Daewoo (DSME) and Korea Shipbuilding (KSOE). This move comes after China State (CSSC) and China Shipbuilding (CSIC) merged in 2019 creating the then world’s largest shipbuilder. Nursing its champions has for long been a Beijing strategy – not only in shipping.
The wildcard weekend
As the world closed for the pandemic the oil tanker business was having a feast. As major oil exporters engaged in a dogfight, worthy of one that was set up by the former Atlanta Falcons quarterback Michael Vick in his heydays back in 2000s when he appeared to be as much of an illegal dog-fighting promotor as a top footballer.
A lot of future oil demand was moved forward but not as much as most people expected. Splash Extra argues that logistical floating storage fortunately prevented a higher utilisation of the tanker fleet – and at the same time developed high freight rates for the entire business.
Being inefficient remains the sacred strategy of the entire shipping industry. Cutting speed is just one of many tools in the box that can be applied to achieve that.
In 2021, the oil tanker business will long for another OPEC+ alliance dogfight. With money in the stash they can wait it out until the second half of the year. If judged by the present, surprising ability of the alliance to allow for Russia to increase its exports and Saudi Arabia to make deeper cuts to its exports – the tanker business must be patient.
Super Bowl Sunday
As a first ever, the Super Bowl will be played on Asian turf. Oil tankers have stopped worrying and learned to love the bomb. No need to care about what once was – demand origination from the North Atlantic basin and the Mexican Gulf.
Despite a relative weakness in Chinese crude oil imports in 2020 – that saw growth of ‘only’ 36.7m tonnes (7.3%), it sits comfortably on top of every stat chart for tanker industry demand.
Splash Extra expects that China quarterback Xi Jinping will deliver, by far, the most rushing yards in 2021 – bringing barrels into China to fuel its ongoing Covid-19 recovery and overall economic progress.
