• DATVF.ATLPHL
    1.795
    -0.005
    -0.3%
  • DATVF.CHIATL
    1.738
    0.070
    4.2%
  • DATVF.DALLAX
    1.102
    0.028
    2.6%
  • DATVF.LAXDAL
    1.495
    -0.012
    -0.8%
  • DATVF.SEALAX
    0.835
    0.053
    6.8%
  • DATVF.PHLCHI
    0.975
    0.049
    5.3%
  • DATVF.LAXSEA
    2.250
    0.072
    3.3%
  • DATVF.VEU
    1.503
    0.038
    2.6%
  • DATVF.VNU
    1.448
    0.036
    2.5%
  • DATVF.VSU
    1.299
    0.009
    0.7%
  • DATVF.VWU
    1.542
    0.062
    4.2%
  • ITVI.USA
    10,149.240
    -70.640
    -0.7%
  • OTRI.USA
    3.780
    -0.080
    -2.1%
  • OTVI.USA
    10,139.180
    -75.530
    -0.7%
  • TLT.USA
    2.500
    0.000
    0%
  • WAIT.USA
    151.000
    5.000
    3.4%
  • DATVF.ATLPHL
    1.795
    -0.005
    -0.3%
  • DATVF.CHIATL
    1.738
    0.070
    4.2%
  • DATVF.DALLAX
    1.102
    0.028
    2.6%
  • DATVF.LAXDAL
    1.495
    -0.012
    -0.8%
  • DATVF.SEALAX
    0.835
    0.053
    6.8%
  • DATVF.PHLCHI
    0.975
    0.049
    5.3%
  • DATVF.LAXSEA
    2.250
    0.072
    3.3%
  • DATVF.VEU
    1.503
    0.038
    2.6%
  • DATVF.VNU
    1.448
    0.036
    2.5%
  • DATVF.VSU
    1.299
    0.009
    0.7%
  • DATVF.VWU
    1.542
    0.062
    4.2%
  • ITVI.USA
    10,149.240
    -70.640
    -0.7%
  • OTRI.USA
    3.780
    -0.080
    -2.1%
  • OTVI.USA
    10,139.180
    -75.530
    -0.7%
  • TLT.USA
    2.500
    0.000
    0%
  • WAIT.USA
    151.000
    5.000
    3.4%
EnergyMaritimeOcean shipping

Port Report: Future of tanker shipping murkier than ever

Less intense use of oil and coal likely to impact asset values over time.

The oil tanker industry is nearly 130 years old, having first been developed in 1890 by the founder of Shell. Now the industry may be entering its twilight if, and only if, the world switches to using less oil in the long term, according to Maritime Strategies International.

In a report commissioned by the philanthropy European Climate Foundation, MSI said that oil tankers, along with coal carriers, are most at risk of demand destruction as governments look to reduce their carbon dioxide output.

Industry is also backing up those efforts. Maersk (Nasdaq OMX: MAER.B) is in the midst of trialling biofuel-powered voyages as a way to cut its emission by 2050

Containerships, though, will not be as impacted by the decreasing hydrocarbon demand. Rather tankers will bear the brunt under MSI’s worst case scenario, which shows world oil consumption dropping by half by 2050.

MSI’s estimates of seaborne trade in hydrocarbons

While “falling demand is not unprecedented in the shipping industry, the sustained nature of the decline is,” MSI said. Under MSI’s lowest oil growth scenario,  “tanker demand would fall by slightly more than a third.” Tanker demand would fall every year from 2025 onward, it added.

Coal, of course, remains under long-term secular pressure as utilities switch to natural gas and renewables. The result is that demand for coal transportation would fall by half over the forecast period. 

MSI’s estimates of utilization

Because bulk carriers are versatile in the cargo capability, they are spared the more dire demand destruction forecast. MSI said dry bulk demand would fall 14 percent from 2020 through 2035. 

The long-term demand scenario for tanker shipping determines whether investors want to fund such assets. Likewise, the outlook for dry bulk shipping may also be tempered, despite some recent improvements in freight rates.

MSI posits that “by 2030 the dry bulk shipping industry would be worth half what it had been a decade earlier.” But it does see 2030 as a low point with ship valuations raising after that.

As for tankers, the value hit “would be less dramatic, but without respite” as ship values dropping by nearly a quarter by 2045. 

The hit from reduced carbon demand would escalate with the size of the ship. Earnings for a capesize bulker, among the largest currently carrying coal, would be roughly half of their long-term level. The largest tankers would see their earnings cut by a third. 

MSI said, “[s]hip financiers would also find themselves caught in a vice, with earnings unable to cover debt repayments and falling life expectancy reducing the runway to recover a loan before the vessel is scrapped.”

But MSI’s projections, remain just that. Its reduced demand scenario is based on world governments meeting Intergovernmental Panel on Climate Change goals of limiting emissions. But many nations are failing to live up to those goals.

Ten seafarers taken by pirates off Nigeria

Kidnapping adds to rash of piracy attacks off Africa. (Splash 247)

So Iran, where’s that ship?

AIS data goes dark for U.A.E-owned tanker raising concerns of Iranian seizure. (Maritime Executive)

First freight derivative traded for LNG shipping

Traders cite exceptionally volatile prices for using hedging instruments. (Seatrade Maritime)

Australian port authority sees flat year

Pilbara Ports Authority says decline stems from weaker iron ore exports. (MarineLink)

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Michael Angell, Bulk and Intermodal Editor

Michael Angell covers maritime, intermodal and related topics for FreightWaves. His interest in transportation stretches back several generations. One great-grandfather was a dray horseman along the New York waterfront and another was a railway engineer in Texas. More recently, Michael has written about the shipping industry for TradeWinds, energy markets for Oil Price Information Service, and general business topics for FactSet Mergerstat and Investor's Business Daily. When he is not stuck in the office, he enjoys tours of ports, terminals, and railyards.

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