All we know about 2019 is that it will be a year unlike any other. Craig Jallal wants to hear how you think the next 12 months will shape up.
One of my takeaways from the recent Tanker Shipping & Trade Conference is that, in general, the tanker industry is expecting the current upbeat Q4 earnings of 2018 to carry on through into the first half of 2019.
At about the same time as Nor-Shipping next June, the next tranche of tanker newbuildings will be delivered, thereby increasing supply and dampening the market.
At least that is what would happen in a ‘normal’ tanker market. But 2019 is not going to be a normal market.
The introduction of the IMO 2020 global sulphur cap is guaranteed to produce significant abnormalities.
By Nor-Shipping, work will be well underway to clear down the stocks of high sulphur fuel from the tank farms. Bunker suppliers may even offer a discount to shift stocks. As Euronav chief executive officer Paddy Rodgers said at the Tanker Shipping & Trade conference in November, there may even be opportunities to buy discounted fuel and store it on one’s own tankers to sell later to those owners who fitted scrubbers.
Such an arbitrage play would depend on the cost of carry: would shareholders be satisfied with the explanation of tying up capital in stocks of high sulphur fuel in the expectation of a spike in prices?
It is also a question of scale, and to be honest, I don’t see any tanker owner having the scale required. Even if all the tanker owners in the world pooled resources and purchased stocks of high sulphur fuel, the stockpile would be miniscule compared to the flows of fuel the oil majors could produce.
So, while there may be some attempts to corner a supply of high sulphur fuel, I believe the second half of 2019 will be marked by a level of logistical chaos that shipping analysts normally only foresee in scenarios such as the closure of the Suez Canal.
How bad can it get? Well, I am going to stick my neck out here. I believe we may see Aframax earnings spike at three times current levels to US$100,000/day at some point in 2019 at the height of the logistical chaos.
What do you think? Agree? Disagree? Either way, I want to know. Send me your predictions for 2019, and I will run a full round-up of predictions and reactions in early January 2019.
Email me at firstname.lastname@example.org
For further discussion of the prospects in 2019, book your place at the Asian Tanker Conference, 26-27 February 2019, in Singapore.