Trafigura Forecasts Tougher Market for Tankers in 2016

Trafigura says "flagging global economic growth" and declining oil prices will create challenging market conditions for wet freight in 2016.

Trafigura Group Pte (Trafigura) in its annual report says that, while lower bunker costs supported earnings in all tanker segments during 2015, the company expects the 2016 year to bring tougher conditions for the currently strong tanker market.

Trafigura says it also expects that dry bulk shipping will continue to see its current poor conditions next year, as over supply and uncertainties in demand for dry bulk cargoes persist.

Wet Freight Results and Outlook

Earlier this month, Ship & Bunker reported that low prices have increased demand for oil products, pushing tanker rates to a seven-year high, and causing a growing number of bookings and unloading delays of days or even weeks due to a lack of space in on-land storage.

Trafigura notes that it has had a strong year that has been made possible by low fleet growth and strong demand for crude and oil product transport, adding that it achieved 1,959 tanker fixture bookings this year compared to 1,600 fixtures in 2014.

"2015 saw the lowest tanker fleet growth since the late 1990s, creating a healthy supply-demand balance," explained the company.

"Looking ahead, 2016 looks to be a more challenging year as flagging global economic growth and the knock-on effects on oil demand feed through to the freight markets."

Dry Bulk Challenges to Persist

Trafigura notes that, during 2015, a "strong tanker market contrasted with conditions of over supply and less demand in dry freight."

Trafigura explains that conditions for its dry bulk business were "challenging" throughout 2015, noting "a persistent and significant overhang of surplus supply coincided with an overall reduction of demand for freight."

However, despite the challenging conditions for the dry bulk market, the company says it performed "remarkably well," and was able to "record a positive result at a time of significant broader market distress."

The company says that it expects current conditions in the dry bulk sector to persist in 2016.

"The outlook for 2016 remains difficult with the market continuing to be over-supplied and continued uncertainties about the outlook for demand of dry bulk commodities such as iron ore and coal," said Trafigura, adding that the company intends to position itself "conservatively" in terms of its capacity in order to retain its positive financial results during the next year.

On Monday, Ship & Bunker reported that traders last week said that Trafigura had signed a forward financing deal with Russia's Rosneft for 1 million tonnes of bunker fuel from Nakhodka in 2016.