(Producer/Author: West China Securities, You Daozhu, Zhang Hui)
Core View:
Fleet capacity is affected by multiple factors: new orders are scarce and shipowners are willing to invest in new ships, resulting in the current share of handheld orders in the world of crude oil tankers reaching a historical low, and the delivery capacity will gradually decrease in the future; there are positive factors that promote the increase in ship dismantling capacity, including the high proportion of elderly ship capacity, the increase in the number of special inspection ships in 20 years, the potential driving force of the Iran nuclear agreement and environmental regulations; the fleet capacity utilization rate is close to the high level; the speed will further slow down as environmental regulations become stricter. We expect the fleet's effective capacity to grow by 8% in 2022; the growth rate slows to 2% in 2023, of which VLCC is expected to grow by 3%, and Suez and Alfra crude oil tankers remain flat and decline by 1% month-on-month respectively.
1, introduction to the industry chain of crude oil tanker industry .1, industrial chain structure of crude oil tanker industry
Upstream: the upstream enterprises in the industry are mainly ship design and construction manufacturers, and bulk oil products suppliers such as fuel. In the future, we need to focus on: ① The impact of changes in shipyard production capacity on new supply; ② The impact of changes in shipbuilding technology and environmental protection conventions on stock supply. Downstream: Refining and chemical companies or traders. In the future, we need to focus on: ① The long-term impact of changes in the global refining and chemical pattern on crude oil shipping demand; ② The impact of the Russian-Ukrainian incident on the medium-term crude oil refined oil trade pattern; ③ The recovery of consumption demand in China and other regions after the epidemic and the rhythm of the logic of replenishment of Europe and the United States in the replenishment of warehouses.
.2. Upstream industry of crude oil tanker: Shipbuilding
First of all, the cost of holding ship is an important cost of tanker companies. Taking VLCC with a load of about 320,000 dwt as an example, the average price of new shipbuilding in the past five years is US$93 million, and the daily depreciation of a single ship is about US$10,000 per day (calculated based on the depreciation period 22 years). "Lower ship cost and high freight rates" are the key factors for tanker companies to obtain excess profits. Therefore, the current new shipbuilding price and tanker companies' expectations for future freight rates determine the tanker companies' willingness to place shipbuilding orders in the current period. Secondly, the shipyard production capacity cycle will also amplify the cyclical fluctuations of the tanker industry. Taking the current period as an example, China's large shipbuilding group almost sold the ship delivery seats in 2025, and some ship delivery seats for 2026 have been sold. Even if the tanker industry recovers as scheduled, it will face a situation where shipyard production capacity restricts the new supply of the tanker industry, which will in turn extend the duration of the tanker prosperity and the position of the high point of the prosperity.
.3. Crude oil tanker industry: fleet
Total fleet: As of early September 2022, the global crude oil tanker fleet had a total of 2,255 ships, a total of 447 million deadweight tons, an increase of 3% from the beginning of the year. Main routes: The world's main crude oil export sites are Middle East , the United States, West Africa , Russia, South America, etc.; the main crude oil import sites are Asia, Europe and the United States, etc. The global crude oil tanker trade routes revolve around exporting countries-importing countries, among which VLCC tankers are mainly active on routes such as Middle East-East Asia, Middle East-Hong Kong-Hong Kong, and the United States Gulf-Hong Kong-East Asia, and the United States Gulf-Hong Kong-East Asia. The routes of Suez-type crude oil tankers are relatively scattered, mainly on routes such as Middle East-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-H
.4. Downstream industry of crude oil tanker: Serving global crude oil sea freight trade
maritime freight is the main way of fulfillment of global crude oil trade. According to BP statistics, the global crude oil trade volume in 2021 was 41.5 million barrels per day, of which the maritime trade volume was about 37.2 million barrels per day, accounting for nearly 90%. From the perspective of regional distribution, nearly 60% of global crude oil sea transportation imports occurred in the Asia-Pacific region in 2021, followed by Europe (26%). Imbalance of production and sales locations is the underlying logic of crude oil trade. For example, the refining capacity in the Asia-Pacific region accounts for 36% of the total global production capacity, but crude oil production accounts for only 9% of the global share.
2. Supply side: will be affected by multiple factors .1. Research framework for crude oil tanker supply side
Delivery capacity: from signing a shipbuilding contract (new order) - construction (handheld order) - delivery (delivery volume), it will take about 2 years to complete the construction cycle.Disassembled capacity: The proportion of elderly ships determines the disassembled capacity space of the ship type, but the price of ship disassembly and the owner's expectations for future freight rates will affect the owner's decision to disassembly. Capacity utilization: Remove idle capacity in the market and capacity for floating cabins, and active capacity in the market can be obtained. Speed: The increase or decrease in speed will release/absorb part of the market capacity. The upcoming EEXI and CII will accelerate the slowdown in fleet capacity.
.2. New delivery capacity: We expect new capacity to be limited in the future
Since the second half of 2021, the number of new crude oil tankers has been low, and future growth is still under pressure. Reason: 1) Since 2009, the tanker market (except for the rush to buy craze caused by the crude oil price war in the first half of 2020 and the temporary market improvement caused by the increase in floating tank capacity) has been in a state of sluggishness for a long time, and the shipowner's company's operating conditions are not good. 2) The shipyard docking period is scheduled to 2025/2026, and the delivery cycle is lengthened and the owner's willingness to set the ship is low. 3) The direction of ship green technology is still unclear, and ship owners are cautious in investing in new ships. 4) Under the background of global energy transformation, ship owners are worried about the long-term market demand in the future and are more willing to invest in second-hand ships.
.3. Dismantling capacity: Adding potential factors to promote dismantling, the space to be dismantled is large
Shipowner makes the decision to dismantle the ship, which is a game of profitable space for ships to continue operating, profits sold to the ship dismantling market, and expectations for future freight markets. Judging from historical data, the number of ship dismantling is highly correlated with freight and ship dismantling prices. When ship dismantling prices are high and freight markets are sluggish, ship dismantling volume increases. The price of ship dismantling is affected by the supply and demand of the ship dismantling market itself. ship dismantling market supply side is the transportation capacity to be dismantled in the market, and the demand side is the trading needs of cash buyers. The supply side depends on the proportion of the elderly fleet, the rise and fall of the freight market, environmental protection regulations, etc. The demand side depends on the profit available to cash buyers, i.e. the value of scrap steel after the ship is dismantled. In addition, the price of ship dismantling will be affected by factors such as the exchange rate of the local currency of the ship dismantling yard against the US dollar, the financing environment of the ship dismantling country.
.4. Capacity utilization rate: The utilization rate is high
Capacity utilization rate has rebounded to near normal levels, and the capacity that can continue to be released is limited. At present, the capacity utilization rates of VLCC, Suez and Afura crude oil tanker fleets have reached 90%, 92% and 88% respectively, and the capacity utilization rates in 2019 are 90%, 93% and 89% respectively.
.5. Speed: Environmental protection regulations further promote speed reduction
High fuel prices & environmental protection regulations will promote the fleet to further reduce speed. Through calculation, it can be calculated that for every 1 knot of slowing down of crude oil tankers, they will absorb about 8%-9% of the fleet capacity. In recent years, the speed of crude oil tankers has shown a downward trend year by year. The average speed of crude oil tankers from January to August 2022 is 11.2 knots, of which VLCC is 11.3 knots (the maximum speed of crude oil tankers in the past five years is about 11.8 knots, and the maximum VLCC is 12.5 knots). The desulfurization tower and energy-saving ships installed in VLCC tankers have slightly higher speeds, about 11.6 knots and 11.5 knots. Suez and Alfra tankers have recently increased their speed by 0.2 knots and 0.3 knots compared with before the conflict between Russia and Ukraine; VLCC speed in August increased by 0.15 knots compared with July.
3. Demand side: The expected transportation volume is resonant with the distance .1. Transport demand analysis logic & key factors
Crude oil sea freight trade volume: The geographical area of crude oil producing countries and consumer countries does not match the geographical area to generate crude oil trade. According to BP data, the global crude oil trade balance in 2021 was 41.3 million barrels per day, of which about 37.2 million barrels per day is the maritime trade volume, accounting for nearly 90%. The export volume of crude oil producers and import volume of consumer countries jointly determines the volume of crude oil trade. The import volume for consumer countries not only depends on the country's demand for imported crude oil in the year, but also needs to consider changes in inventory.
.2. Global crude oil trade volume deduction
Based on the IEA's forecast of global crude oil production and consumption in 2022 and 2023, it can be calculated that the surplus of oil-producing countries will increase by about 2.38 million barrels per day in 2022. Assumptions 1) The surplus of oil-producing countries and the shortage of crude oil in consumer countries drives global crude oil trade; 2) Assuming that the increase in trade volume this year is slightly lower than the surplus of production but higher than the shortage of consumer countries (about 1.5 million barrels per day); 3) Without considering the additional output increase brought about by the Iran nuclear agreement, global crude oil trade will grow by about 4% in 2022. The growth rate in 2023 is about 3%.
.3. Global crude oil import and export trade distribution
According to data in 2021, the export volume in the Middle East accounts for 45% of the global crude oil maritime trade, of which Saudi accounts for 17%; in addition, FSU accounts for 14%; Africa accounts for 14%; and the United States accounts for 8%. From the perspective of importing countries, imports in Asia account for 60%, of which China's maritime imports account for 25% of the world and India account for 11%; in addition, Europe accounts for 25%; and the United States accounts for 7%.
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