Tankers outstrip crude orders
The mainland's insatiable appetite for oil will not be enough to absorb all the new crude oil tankers due to be delivered over the next three years.
The growing move by China to control more of its own merchant tanker fleet will also reduce opportunities for foreign shipowners to charter vessels to mainland companies, shipping experts warned yesterday.
'I can't see China being able to absorb the number of ships being delivered,' said Nicolas Duran, head of sale and purchase and new building departments at shipbroking house Fearnleys Asia Singapore.
Rival shipbroker Clarksons estimates there are 626 tankers totalling 90.7 million dead weight tonnes on order for delivery from now to 2014. In tonnage terms, this is equivalent to 21.3 per cent of the global tanker fleet. China's oil demand is forecast to grow 2 per cent per year.
Speaking at a Marine Money ship finance conference in Singapore yesterday, Duran said the growth in mainland oil demand 'would not benefit foreign shipowners as some would like to think'.
The mainland has a target to carry between 50 per cent to 70 per cent of its oil imports on Chinese owned or controlled ships. Duran said: 'I don't think [foreign] shipowners have woken up to the impact of that.'
If that target was achieved it would reduce the amount of oil cargoes available for charter to foreign shipowners and further depress charter rates for supertankers of around 300,000 dead weight tonnes. Mainland tanker owners include China Ocean Shipping (Group), China Shipping Development and Sinotrans-CSC.
Lease rates for these very large crude carriers have slumped in the face of too many ships chasing too few cargoes.
Rates at the end of last week were down to US$8,600 per day for a voyage from West Africa to China compared with an average of almost US$43,000 per day last year.
Some shipowners have forecast there will not be a recovery in rates until at least 2016.
Erik Lewenhaupt, general manager of shipowner Stena Bulk Singapore, said China had a strategic objective to secure its energy supply and would 'bulk up on tankers'. This could see more orders from Chinese shipowners to mainland shipyards. He said the mainland's big yard capacity was a concern.
There were recently rumours mainland owners planned to order 80 supertankers from domestic shipbuilders, although Peter Illingworth, managing director of DVB Group Merchant Bank (Asia) said there was no evidence orders had been placed.
Duran said charter rates were likely to remain in the doldrums especially if OPEC cut oil production to buoy oil prices above US$110 per barrel. If oil production was reduced, Duran expected these cuts to remain in place for the rest of this year and the whole of 2012.
He said charter rates had been adversely affected by higher prices for Brent crude which reduced China's reliance on oil from West Africa. Duran forecast that closure of refineries in the United States and Europe because of environmental and cost reasons and the growth of refining capacity in the Middle East and Asia would affect the market for smaller tankers carrying refined products.
'Some 65 per cent of the new refining capacity in the next four years will be in the Middle East, India and China,' he said. 'India is boosting refining, mostly geared for export.'