Back in 2010 DVB Bank said in its annual report, "The outlook for 2012 looks considerably brighter." It cited a narrowing of the supply/demand imbalance in the product tanker market as one reason for medium term hope. The bank was not alone, a quick glance shows Torm and Eitzen Chemicals both backed the exact same basic principles.
A 2012 KPMG survey of German shipping companies revealed that “only in 2014 to 2016 is a change in tanker fortunes expected, half of the respondents forecast a rate increase here, and thereby a marked recovery of the market.”
In 2013, Bank of America Merill Lynch forecast a meaningful increase in dry bulk freight rates by 2015 and Pareto Shipping predicted a tightening market balance to 2015.
DVB’s prediction was not to be. The supply/demand imbalance for the product trade grew steadily from the global recession right through to last year, according to Braemar Seascope data. Drewry Maritime Research’s numbers back the trend, showing asset values and charter rates falling for LR1s and LR2s between 2010 and 2012, with MRs holding steady.
Every time the wall planner gets replaced, it seems recovery steps back a year, staying about two years away. Whether it is far enough to let hope creep into the data interpretation, or market developments have been pushing hope back year-on-year, a couple of years seems about the right level of optimism to hold.
The one exception is when it comes to the brokers.
The current worst case scenario from Braemar Seascope, shared at the Seatrade Tanker Industry Conference in October 2013, places product supply/demand balance well beyond 2017, with utilisation lingering defiantly around 80% with no signs of improvement, consistent with forecasts at the same event a year earlier.
Even Braemar’s best case scenario for supply and demand pins balance in 2016, and the necessary underlying 7% demand growth and 15 year age limit on vessels lies beyond the dreams of owners with the rosiest of tinted spectacles.
"We always said it would be 2014 before any meaningful recovery took hold, because it would take that long for the macro economic environment to settle down,” Mark Williams, research director at Bramemar Seascope told Seatrade Global.
"The recovery is still fragile in Europe, though it may be gaining traction in the US and UK, while emerging market growth is slowing. This year should see an improvement over 2013 but all the newbuilding orders placed last year are putting a longer term recovery in doubt.”
If market forces cast a shadow over even the gloomy forecasts, perhaps its best to just check back in two years.