The global tanker shipping market may face “greater inefficiencies” in terms of having available tonnage as the IMO 2020 deadline draws near, due mainly to vessels being taken out to install scrubbers, according to Diamond S Shipping.
“Tanker availability is expected to decline over the second half of the year as a result of about 16% of the global fleet’s installation of exhaust gas cleaning systems, or scrubbers. We expect greater inefficiencies with available tonnage as the industry begins its readiness to comply with IMO 2020 regulations,” Diamond S Shipping stated.
From 1 January 2020, all ships are required to burn bunker fuel with a maximum sulphur content of 0.5%. If the ships wish to continue using high sulphur 3.5% fuel, they will have to install scrubbers to bring the fuel sulphur content down to the compliant level.
“The company expects tanker supply to decrease leading up to compliance with IMO 2020 regulations as vessels are taken out of service for installation of scrubbers,” Diamond S Shipping said.
With supply anticipated to tighten, the overall tanker market condition is expected to improve in the latter part of this year.
A growing distance between oil supply growth west of the Suez Canal and oil demand growth from east of the Suez Canal is forecast to drive an increase in demand for oil tankers. Additionally, as oil demand continues to rise to over 100 million barrels per day, global inventories are expected to decrease, creating further demand for tankers.
Additionally, Diamond S Shipping noted that the order book for new tanker supply is at manageable levels.
Craig H. Stevenson Jr., president and CEO of Diamond S, commented: “We are anticipating an uplift in the second half of 2019, as we prepare for the major shift toward compliance with IMO 2020 regulations.
“Refiners have accelerated their annual maintenance; storage facilities are beginning to lower their tanks, and shipowners are beginning their retrofit scrubber installations. These factors, along with anticipated oil demand over 100 million barrels per day, are expected to create higher utilisation for available tankers.”
He added: “With 80% exposure to the spot market, the large Diamond S fleet of 68 crude and product carriers is positioned to benefit from the expected rise in earnings for the tanker market.”