French orders to foreign shipyards

56
US$/day
25,000
20,000
15,000
10,000
5,000
0
The direct consequence of these events in the refined
product transport market is the shortening of traditional
routes (Europe/India) and/or the end of Middle East Gulf/
India traffic.
The European market was affected by the slowing of
Russian exports from Black Sea and Baltic ports.
The consolidation phenomenon occurring among oil
companies served to restrain end-of-year trading activity.
Despite this, the overall level of demand exceeded that
of the previous year. Lower rates recorded in 1999 are
much more a result of excess tonnage and shortened
routes than of weak demand in the sector.
• A strong increase in the capacity
of the refined product transport fleet
Some 85 ships were delivered in 1999, resulting from
the boom in orders in 1996 and 1997. Most of the units
were from 43,000 to 47,000 dwt (41 units) or of greater
than 70,000 dwt (23 units). The increase in average size
(45,000 dwt in 1999 compared to 33,500 dwt in 1998)
coupled with a higher average cruising speed, brought
on an increase of nearly 15% in transport efficiency as
calculated in terms of tonnes/miles.
On the other hand, only 13 older vessels totalling
430,000 dwt (too few) departed for the scrapyard.
This is relatively disquieting in view of the following:
• The current refined product transport fleet is the largest,
ahead of the Aframax fleet (there are more than 1,500
units exceeding 10,000 dwt compared to Aframax
figures of 570-580 units).
• Average age is only slightly over 16 years.
• With fewer technical restrictions because of shorter routes
and less corrosive cargoes, average life is high at 27 years.
Product tanker freight rates
Average earnings
55,000 T MEG/Japan
In addition, the restructuring of refined product imports
from Nigeria and the new refinery capabilities of India
have practically eliminated the long lines of ships that
were used as floating storage facilities during periods
lasting months, making them available on the market.
Freight rate analysis
35,000 T Rotterdam/New York
28,500 T Caribs/Usac
Jan 98 Feb 98 Mar 98 May 98 Jun 98 Jul 98 Sep 98 Oct 98 Dec 98 Jan 99 Feb 99 Apr 99 May 99 Jul 99 Aug 99 Sep 99 Nov 99 Dec 99
Although the first part of the year proved to be less unfavourable
than expected in light of chance events - notably
the March closing of US West coast refineries - rates began
to fall after June, with no winter rebound as yet detected.
• Middle/Far East
The transport of light clean products, naphtha and distillates
to Japan and Korea remains an LR2 specialty. Despite the size
of the Torm-Waterfront pool, which brings together around
ten LR2s and 17 LR1s (nearly 25% of the total tonnage
capacity for this range of ship), average yields fell to
$13,000-13,500/day for LR1s and $15,000-16,000 for LR2s.
These ships are not versatile, making their use directly
linked with middle-eastern operations. It is nonetheless
interesting to observe activity in the Middle East
Gulf/Europe jet fuel market and Middle East Gulf/USA
distillates that give LR1s an alternative use.
The 43,000 to 47,000 dwt size was hurt by sharply reduced
Indian diesel imports due to the Reliance refinery entering
into production (with a 21.5 million tonnes per year production
capacity), Indian Oil (9 million tonnes per year) and Essar
Oil (10.5 million tonnes per year). However, losses were
limited after April, because of increases in Japanese and
Korean consumption and the non-competitiveness of
the Singapore refineries with relation to their Saudi and
Kuwaiti competitors. This does not change the fact
that daily returns for this size ship fell by nearly 20% over
last year’s income levels.