Tankers earnings suffer in a volatile 2020

Speaking at the 2020 Tanker Shipping & Trade virtual conference, Maritime Strategies International (MSI) director - Tanker Markets and Energy, Tim Smith, said that 2020 had been a year of two halves. “The first half of the year was characterised by extreme volatility and extreme earnings levels, with the spike we saw in March and April (2020),” said Mr Smith.

Earnings reduced suddenly in Q2 2020. “The second half of the year was characterised by much lower levels in the spot sector and we have seen timecharter rates follow that market movement downwards,” said Mr Smith.

This was forecast by MSI in April 2020 when earnings were at their highest levels. At the time, MSI viewed this as unsustainable.

Looking ahead, the outlook for 2021 and beyond will be predicated on the speed of the drawdown of land-based inventory. A sudden drawdown of land-based oil inventory will reduce demand for tankers to import crude oil and earnings are likely to weaken. The consequence of a crude oil inventory build-up is an inevitable drawdown and reductions in tanker earnings.

“We (MSI) are quite bearish on how the (2020) inventory build-up will play out on the tanker markets in the next year or so,” said Mr Smith. The MSI outlook is for a depression in tanker rates in 2021. “We are expecting next year to be difficult for the sector,” said Mr Smith.

Longer term, the general picture is one of recovery. “Beyond (2021) the picture is more positive and that is really supported by the low orderbook and certainly our expectation for high levels of scrapping,” he said.

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