June 2024 | Tanker Trends Mid-Year Shipping Industry Report

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As we reach the midpoint of 2024, the shipping industry is at a critical juncture. This period is pivotal for assessing the year's potential outcomes and setting the stage for bold projections that industry forecasters and analysts are already making for 2025.

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The Complex Landscape of Shipping

Shipping, by its very nature, presents unique challenges for analysis, forecasting, and projection. A confluence of factors influences this industry:

• Geopolitical Drivers: These include global political tensions and conflicts that can disrupt shipping routes and schedules.
• Supply Chain Complexities: Global supply chains' intricate and interconnected nature can lead to unforeseen delays and complications.

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Social Disruptions: These can range from labor strikes at major ports, like the recent one in Los Angeles, to pandemics, such as the COVID-19 outbreak that led to significant disruptions in global shipping, and other social issues like protests against environmental pollution caused by shipping activities.

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Environmental Concerns: Regulatory changes, such as the International Maritime Organization's (IMO) sulfur cap regulations, and environmental initiatives like the push for decarbonization and the use of alternative fuels, are increasingly shaping the industry's operations and driving the adoption of new technologies and practices. Despite the complex and challenging nature of managing remote movable assets across vast oceans, the shipping industry has consistently demonstrated resilience, intelligence, and unwavering dedication.

This steadfastness is a testament to the industry's ability to navigate through turbulent times, instilling confidence in its stakeholders.

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Geopolitical Disruptions and Growth

Interestingly, geopolitical disruptions, while challenging, have also opened new avenues for growth. A notable trend in 2024 has been the 2.1% increase in sailing distances, driving demand for additional MR Clean Tanker tonnage. These positive developments indicate a potential for growth, inspiring optimism in the industry's future.?

However, these projections come with caveats. The anticipated behaviors of geopolitical actors, such as the Houthis and Russia, may change post-early 2025, potentially leading to shorter sailing distances and a consequent decline in demand growth.

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Market Performance and Trends

The market for MR clean products had a weak start in 2024, with ton miles down 5% year-over-year due to reduced longer-distance sailings. Despite this slow start, short-term rate fluctuations are expected. Time charter rates for more extended periods show that while 2024 rates are weaker than 2023, they remain 50% above the 10-year average, indicating underlying market strength.

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Renewed Contracting and Price Trends

Since 2023, the product tanker market has seen a resurgence in newbuild contracting. The newbuild book now constitutes 15% of the existing fleet, double the percentage from a year ago. Visionary owners, particularly in China, have moved swiftly to secure favorable delivery dates for their product carriers.

Ship newbuild prices have shown a promising increase in 2024 compared to 2023, as owners prepare for a supply-demand imbalance anticipated in 2026. Some owners will pay a 30% premium over 2023 to position themselves advantageously for the future. Secondhand tankers in the 5-7-year-old bracket are fetching prices 60% higher than recent sales, reflecting strong market sentiment.

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Future Outlook and Technological Confidence

Looking ahead, owners' concerns about managing future fuel technologies have eased thanks to more proven and reliable options, such as low-sulfur fuels, LNG (liquefied natural gas), and biofuels. This growing confidence is likely to bolster investment and innovation within the industry.

In conclusion, the mid-year of 2024 marks a significant period for the shipping industry, highlighting both challenges and opportunities. As the industry navigates these waters, its resilience and adaptability continue to drive it forward, setting the stage for a promising future. This adaptability reassures the audience of the industry's ability to weather storms and emerge stronger.