A confluence of favorable conditions are bearing down on the very large crude carrier (VLCC) freight market, industry monitor Maritime Strategies International (MSI) said in a recent report.
High fleet growth, reduced waiting times, port decongestion mixed with lower crude import growth are putting pressure on the earnings of VLCC owners, the company said.
Further, MSI said supply is expected to outpace demand going into 2017.
“We are seeing a step change in delivery volumes this year, concentrated in the larger crude and products segments. Notably we have yet to see any increase in scrapping activity to counteract this, but we do expect this to pick up in H2 and 2017,” MSI senior analyst Tim Smith
He added that “the market is now operating under ‘normal’ conditions with regard to congestion and bottlenecks which were prevalent and constructive feature for freight rates earlier in 2016.”
Additionally, the benchmarking firm reported that the spot forecast for Suezmax segment is slow compared to figures from the past two winters. Gains will continue to be soft even as the market picks up the pace.
In contrast, the Aframax segment is forecast to experience less supply side pressure but it will lag behind its larger peers, MSI concluded.