Rate Fall Sparks Speculation Over Tanker Market Consolidation

Falling tanker rates have sparked speculation that an increase in consolidation among ship owners may be on the horizon.

Even though tanker markets have been booming in the wake of chronically low oil prices, recent falling rates have sparked speculation that an increase in consolidation among ship owners may be on the horizon, Lloyd's List reports.

"Consolidation normally happens when the market is in a downturn, but it has to be worse than we are seeing now," said Thomas Wøidemann, president of Lauritzen Kosan A/S (Lauritzen Kosan).

Very large crude carrier (VLCC) spot rate earnings are said to have declined to $23,000 per day from $51,000 per day on June 7, while medium range product tanker earnings for the Atlantic round trip have slid to to $9,200 per day from $17,400 per day in early May. 

While the tanker market is still being called "healthy," it is suggested that ship owners could soon move to consolidation in order to mitigate possible risk.

"There is no upward-going sentiment, even though all the lights are green," said Christian Ingerslev, Maersk Tankers chief commercial officer, pointing to negative sentiment among owners as the cause, noting that "tonnes are being produced, vessels are open, yet the market is really low."

However, Maritime Strategies International (MSI), in its latest report, puts forth that it may be more than just sentiment affecting the tanker market right now, suggesting that it may in fact be starting to point toward some downside risks as fleet growth accelerates and demand causes freight rate decline.

"The market has undoubtedly taken a turn for the worse," stated a MSI researcher.

In May, Teekay Tankers Ltd. (Teekay Tankers) said higher bunker prices contributed to softer tanker rates during 2016's Q1.