Page 35 - ΝΑΥΤΙΚΑ ΧΡΟΝΙΚΑ - ΟΚΤΩΒΡΙΟΣ 2024

Historically, tonnage above 20 years of age has Handy to VLCC 20+ yr Trade By
either entered adjacent trades, namely near the Cargo Origin
Indian and the Indonesian Coast, and contraband 80%
trades from Venezuela, Iran, and Russia, or has Dark/Grey
often been used as floating storage facilities. Trade
Moreover, a troubling trend is that 60% of vessels 70% 69% 68% Historical
over 20 years old (ranging from Handys to VLCCs) Aged Trade
are now engaged in “Dark” and “Grey” trades, i.e.
in less regulated or unsanctioned markets. These Normal
vessels are often poorly maintained and face sanc- 60%
tions and difficulties in sourcing spare parts. This
raises the question of whether these ageing fleets
will deteriorate faster, and thus be scrapped earlier. 50%

Total Scrap & Aging 20+ versus Known Newbuild 40%
Programme (Accumulated)

100%
30% 29% 29%
200 90%

20%
80%

70%
150
10%
60%
2% 3%
50% 0%
100 2023 2024
#Million DWT 40% factor behind cross-segment cannibalisation.

This, combined with the wish for large crude
30%
elevated earnings during Q4, has enabled trad-
50 tankers to re-position West of Suez for seasonal
20%
ers to arbitrage middle distillate from East to
West on “cannibalising” tonnage for significant
10%
parts of Q3.
It’s important to highlight that Q3 earnings for
0 0%
the clean products segment could have been
much stronger if not for the impact of canni-
2024 2025 2026 2027 2028 balisation, which contributed to the downturn
in the latter part of the quarter. However, this
also creates a self-fulfilling cycle: lower earnings
Total Scrap Total Aging Total Newbuild Aframax Newbuild %
DWT (LHS) DWT (LHS) DWT (LHS) Share (RHS) in the clean products segment have narrowed
the profitability gap, reducing the competitive
advantage of large tankers.
❷ A notable surge in Suezmax/LR3 tank- Meanwhile, VLCCs and Suezmaxes are entering
ers trading clean products has been their peak earnings period in Q4 and Q1. Recent
observed lately. Are Suezmaxes a long- data from September shows a decline in canni-
term competitor for LR2 tankers or will balisation, with most of the volumes having been
they return to trading oil? traded in August, when market conditions still
We believe that Suezmax and VLCC “cannibal- made it profitable. Moving forward, it is unlikely
isation” will drop to regular averages by Octo- we will see much cannibalisation over the next six
ber. The large spread between clean petroleum months, a conviction further supported by the fact
products versus dirty trading earnings for a that there are few, if any, large tanker newbuild
prolonged period of time has been the driving deliveries expected for the remainder of 2024.

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