Spot market earnings for VLCCs will average $2,500/day in 2022 on a non-eco, no scrubber basis (US $11,000/day for ECO-designs, without scrubbers), while the peak year for VLCC spot market earnings have been pushed out to 2025, amid substantial supply-side support. This was a key finding in McQuilling Services 25th Annual Tanker Market Outlook: 2022-2026 Tanker Market Outlook. While conditions are tight for the big ships, Suezmaxes and Aframaxes sectors are projected to return healthier levels in 2022, each benefiting from increased deployment optimization and strong inter-regional trading originating from Atlantic Basin export centers.
The years 2023 and 2024 reveal improving fundamentals for crude tankers, although we are skeptical that crude tanker earnings in 2023 will rise above cash break-even levels for most tankers, as our deep analysis reveals only marginal support to our core supply/demand balance from the forthcoming carbon emissions regulations.
“We find ourselves in a familiar position with our forward calls on the market this year. Recall last January, we published a VLCC full year forecast of $9,000/day, which at the time seemed extremely bearish, but in hindsight was the correct call," said McQuilling Services’ Commercial Director, Stefanos Kazantzis. "The reality for the crude tanker market heading into 2022 is it will face significant supply side pressure, despite our projected positive impact from ton-mile demand growth amid increasing refinery utilization and crude production gains, but at the same time recognizing a significant year-on-year demand decline from unwinding floating storage, but also a reduction in average mileages, particularly from the Middle East. Certainly, a very high orderbook this year will not do owners any favors and we can only hope that this year marks the beginning of an accelerated deletion cycle, to support the market in the years ahead, which in fact appear promising with the expected low delivery schedule in 2023-24 and continued gains in ton-mile demand.”
He added “A key development to watch out for this year are potential changes in asset valuations, which have been supported by high replacement costs, elevated scrap values as well as a general lack of modern inventory available for sale. We anticipate a paradigm shift to occur over the next 12-18 months, whereby inflationary pressures subside, and natural delivery dates offered by yards increase slot availability, particularly as we move into the latter part of the year and 2023. These factors may pressure contract prices according to our newbuilding forecast models, effectively removing an important support pillar for secondhand prices.”