IMO 2020 brings cheer to product tanker market.

Catogory : Market Report

THE International Maritime Organization’s new bunker rules will create incremental demand for product tankers “With potentially 1-2m bpd of incremental product tanker demand paired with higher crack spreads and enhanced arbitrage trading activity, we believe things could get very frothy for the product tanker market. Eventually, there is a strong probability that the refined product tanker market could see meaningful benefits from IMO 2020 implementation, but when that benefit materializes is unclear, it added.Centres for marine fuel distribution will need to undergo inventory change over several months in advance of 2020, and given the time needed to ship and build inventories, it could potentially be a six-month implementation period. However, there have already been some preemptive moves by a number of players to position inventory in advance, so we suspect the beginning of an IMO upturn could be forming now. “Alternatively, we estimate that incremental refined product consumption has been exceeding new ship supply for approximately the past 18 months, offset by inventory draw downs, but it could very well be that basic supply-demand has reached a tipping point and IM0 2020 is just the icing on the cake, or perhaps several layers of icing on the cake.” Given the tremendous operating leverage in the tanker space with effectively zero variable costs and no taxes, changes in spot rates make big differences in profitability. Meanwhile, there has been a sharp improvement in the refined product tanker market, most notably the medium size and handy size vessels over the past few weeks. Since the beginning of March, the triangulated MR spot rate has risen from about $15,000 per day to $22,000 per day.