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Mette Frederiksen

Mette Frederiksen
In News

Transportation Recovery Fund joins Tankers International VLCC Pool as demand for diverse fleets continues

Tankers International’s specialist Scrubber Pool increases in size, reduces in average vessel age.

 

London, 21st June 2023 – Tankers International, the world’s largest shipping pool for VLCCs, has announced today that Transportation Recovery Fund (TRF) operated vessel the TRF Horten has joined its specialist VLCC Scrubber Pool.

The TRF Horten (297,638 DWT / Built 2018) was delivered to Tankers International on 4th June. The total size of the Tankers International fleet now stands at 65 VLCCs, and the specialist Scrubber Pool has increased in size to 37 vessels.

The addition of the TRF Horten has reduced the average age for the scrubber pool to seven years, in contrast to the industry average of 10.7 years, as a part of Tankers International’s mission to replace old and less efficient tonnage with modern and cleaner vessels.

With ownership in 19 ships in the chemical and crude segments, TRF will benefit from a transparent and cost-effective solution to maximise earnings in the spot market through Tankers International’s powerful economies of scale and unparalleled access to relationships and cargoes. TRF will also benefit from more streamlined operations, consistent cash flow, and high-level information sharing associated with Tankers International’s pooling model.

In response to the growing diversification in the VLCC fleet, Tankers International have created a number of sub-pools to reflect unique trading patterners and earning potential to ensure fair sharing of earnings and costs between similar vessel types. For instance, the Tankers International Scrubber Pool functions as a sub-pool operating from a unique financial and commercial perspective while sharing resources across the entire Tankers International fleet.

“The addition of the TRF Horten further improves our pool’s unrivalled strength and depth, delivering clear benefits for TRF and our other Pool partners,” Charlie Grey, CEO of Tankers International, said. “It also represents an exciting opportunity for us to develop a closer relationship with TRF, which offers value to the pool with its knowledge, experience, and expertise. TRF’s decision to join the pool is a statement of trust in the pool’s ability to adapt to changing markets and ensure that all partners are optimised for the future.”

Michael Aasland, CEO of TRF Ship Management, added: “We applaud Tankers International’s reputation for professionalism, trustworthiness, flexibility and service with its experienced management team and relentless focus on driving value for pool partners. We look forward to improved cash flow and revenue as part of a mutually beneficial partnership that sees strong financial returns in the near and long-term.”

Mette Frederiksen
In Editorial

How tanker pools help with CII

If you put your tankers in a pool, it can help you navigate CII, such as from making sure any vessels under risk of being downgraded are kept away from potentially CII damaging charterers, and managing the CII data. Charlie Grey of pool operator Tankers International explains.

CII will push VLCC owners into new territory as they tackle shipping’s first true decarbonisation regulation. Arguments between shipowners and their charterers are simmering with BIMCO caught in crossfire. Regardless, CII is here now, and tanker shipping needs to comply. But how? CII represents the first global carbon emissions regulations applied to the international shipping fleet – something the industry needs to implement if shipping stands a chance at hitting the IMO’s emissions targets.

Yet, CII is not perfect and has several well-documented flaws.

For instance, while installing low-carbon technologies will make a passing grade easier, a highly efficient vessel will not necessarily have a good rating. A highly efficient vessel that sits at anchor for several days will require bunker fuel to power its generators, emitting CO2 yet travelling no distance. This means that an idle, efficient ship may have a worse score than an older, less efficient, but highly utilised ship. VLCC owners have to tackle a difficult trade-off between CII ratings and commercial performance. CII-negative voyages may represent commercial benefits, while CII-specific contractual clauses may be considered negotiable by charterers.

CII concerns add a new dynamic to data analysis. Shipowners now need to consider their vessel’s potential voyage impact on CII ratings alongside, regional pricing, and supply and demand side market trends in actionable analysis. Whilst this entered into force from 1 January 2023, CII scores will not be published next to vessels until January 2024. At the same time, those scores will be out of date for 364 days every year and will only reflect an average up until the end of the last reporting period. This lack of data means that vessels with falling ratings will not see that reflected in their score for some time, while vessels with improving ratings will not have that reflected in their grade until the start of the next calendar year. These inconsistencies limit CII’s usefulness for charterers as an indication of the efficiency of a vessel.

Shipowners and operators are forced to find the right balance between some lucrative CII-negative fixtures and CII-positive voyages, and between cash flow and efficiency technologies. This can create a trade-off between CII scores and short-term profitability for any ship. Shipowners must understand how to operate and trade their ships to tackle this anomaly and achieve a good CII rating; ensuring that they incorporate these requirements into charter party agreements. They must adaptively manage their vessels speeds and idle days throughout the year, ensuring that vessels average a passing grade whilst maximising profits. This adds another layer of complexity for shipowners. CII represents another stream of data that must be analysed and converted into insights and actions.

 

Pool participation

The volume of ships in a pool allows shipowners and operators to benefit from greater economies of scale, financial robustness and flexibility through greater utilisation across their fleets, helping them to mitigate any impact on CII ratings.

Pool partners can take profitable CII-negative fixtures while maintaining ratings across the fleet by spreading those voyages across the pool based on CII scores to date. By doing so, the collective pool of ships can maximise earnings while the pain of CII-negative voyages is minimised for any individual vessel.

The pool simplifies a shipowner’s role, providing regular cash flow based on their vessel’s earning potential in the current market conditions and reducing the need for operational staff. Shipowners can allocate this resource elsewhere, including evaluating and implementing low or no-carbon technology across their fleet.

Another issue is that cash flow can effectively bar small or cash-poor shipowners outside of a pool from longer routes, which are often the most profitable. This is because the shipowner must pay for bunkers before they receive freight payment from a charterer. These routes are inherently CII-positive, as they maximise constant-speed travel and minimise time at anchor. This challenge is something that Tankers International is acutely aware of and can compensate for with the size and structure of its pool.

Tankers International has included indicative voyage CII scores in its Tankers International VLCC Fixture app, showing an estimated letter grade rating and comprehensive calculation for every VLCC voyage fixed.

 

Published in Tanker Operator in May 2023: LINK

Mette Frederiksen
In Insight

Good news for shipowners as VLCC Inter-Atlantic trade remains strong


It’s clear that trading patterns for VLCCs have changed significantly over the last 12 months. European oil markets have seen a clear shift away from Russian crude since the start of the Russia-Ukraine conflict.

Official sanctions by the EU on Russian crude in place today mean that we now see virtually no Russian crude flowing into Europe and other Western economies. In June 2022, the EU Council adopted a sixth package of sanctions that, amongst others, prohibited the purchase, import or transfer of seaborne crude oil and certain petroleum products from Russia into the EU. The restrictions applied from 5 December 2022 for crude oil and from 5 February 2023 for refined petroleum products.

Europe has therefore had to find alternative crude supplies from other sources. We have seen Europe increase its imports from the Middle East, as well as Atlantic based oil suppliers including West Africa, the US and South America.

Smaller tankers have traditionally serviced the routes from these Atlantic basin suppliers to Europe, but in 2022 we saw a marked increase in the use of VLCCs. There were 28 VLCC loadings destined for Europe in August alone. This compares to just 1-4 monthly liftings prior to restrictions on Russian barrels.

Several market factors have aided this development. Firstly, we have simply seen more seaborne oil imports into Europe as Russia’s pipeline network and short haul shuttle shipments were no longer an option.

While the smaller tanker segments – Suezmax and Aframax – saw freight rate spikes in the immediate aftermath of the war breaking out, the VLCC segment had no direct links to Russia, so the freight environment for this group of ships remained flat and relatively low. This relatively weak VLCC freight market allowed VLCCs to compete with the smaller segments on the inter-Atlantic routes that in the past they had zero involvement in.

From the second quarter of 2022 onwards, we saw a sharp rise in inter-Atlantic VLCC liftings, and this elevated level of activity has persisted since. Our proprietary fixture app data does show a short-lived dip in VLCC activity in September and October last year. This was partly due to a drop in crude flows into Europe, according to data from Kpler. This was also the time when the VLCC freight market began its strong recovery, and we saw a proportional increase in the use of smaller tankers compared to the record month of August for the VLCC segment.

Since then, it appears that the inter-Atlantic trade routes have found a new balance and that they are here to stay. The use of VLCC tonnage has increased to 21-23 liftings per month over the last four months.

This trend is a positive development for shipowners. It allows vessel owners to keep their ships in short-haul business in a relatively high market and to be able to load another cargo while freight is high. This can be more lucrative than locking the vessel in on a long-haul trade and risking that the market may have fallen by the time of the next load.

This dynamic creates more volatility in the market with uncertainties around discharge times and with more frequent port operations that shorter voyages inherently carry. The result is the port to sailing time ratio goes up. This new dynamic also allows for increasingly creative trade combinations, and by triangulating a vessel, a shipowner can maximise their earnings compared to a standard Middle East to China trade route, which carries an equal amount of laden to ballast days.

On 25 February 2023 the EU adopted its 10th package of sanctions against Russia and is expected to announce more new sanctions in the coming weeks. We continue to monitor the situation, but we expect the current VLCC market conditions to persist throughout 2023, and beyond.

Mette Frederiksen
In News

Tankers International targets further expansion plans under leadership of newly appointed CEO Charlie Grey

The world’s leading VLCC pool continues to grow its fleet with 20 new additions since the beginning of 2022.

London, 27th April 2023 –  The leading large crude tanker pool, Tankers International, today announced the appointment of Charlie Grey as Chief Executive Officer, replacing CEO Jonathan Lee, who will become Chairman of the board of directors. Grey, who will move from his current role as Chief Operating Officer, will lead the independent organisation through its current phase of growth. Matt Smith will take up the role of COO and will continue to focus on developing voyage optimisation schemes to reduce emissions and improve performance.

Grey officially began his CEO tenure on 3 April and has played a pivotal role to date, alongside the existing board, in expanding Tankers International’s pool of Very Large Crude Carriers (VLCCs). The pool holds 64 vessels today, including an expansion of its specialist scrubber pool from 17 to 34 vessels compared to the start of 2022.

Ensuring a young average vessel age in the pool will be crucial as shipping rides the macro-economic waves, so Tankers International has replaced old and less efficient vessels with modern and energy friendly tonnage. The average age of the pool today is younger than it was at the start of 2022.

Pools have a critical role to play in the safe and transparent transportation of crude across the globe. This is especially true in a highly fragmented VLCC sector. Facing the twin challenges of the energy transition and increasing environmental regulation – shipping pools can allow smaller owners to collaborate more effectively and deliver a more efficient tanker market for all participants.

Tankers International was established in 2000 by a visionary group of tanker owners comprising, amongst others, Euronav NV and International Seaways, inc. VLCC owners who join pools amidst volatile market conditions benefit from improved cashflow and revenues thanks to proven economies of scale, access to a wider customer base, increased financial performance, fairer charter party terms, access to market intelligence and an independent and transparent management service.

The pool has vastly improved in recent years, with its unique revenue sharing methodology and its strength in scale, data, and expertise helping to drive exceptional revenues for participants. Recent developments include the establishment of a new optional climate compensation voyage programme and the continued development of the widely used Tankers International VLCC fixture app.

Charlie Grey, CEO of Tankers International, commented: “I want to thank Jonathan for the fantastic work he’s delivered over the past 10 years, which has ensured that Tankers International has maintained and grown its market-leading position. I am honoured to be able to take the organisation forward, delivering value to the pool partners, expanding our fleet, and continuing to deliver our data-led, analysis-based approach with a human touch; a formula that has served us – and our pool partners – so well.”

Lois K. Zabrocky, International Seaways Inc.’s President and CEO, commented: “Since he was appointed as COO, Charlie excelled at meeting the needs of pool partners while navigating the uncertain trends driving the VLCC market. I am personally confident that Charlie is the right person to build on Jonathan’s great work to position Tankers International for the future.”

“As a founding member over 23 years ago, we have sought the best stewardship for the leading VLCC pool,” Hugo De Stoop, CEO of Euronav NV, added. “I am confident that under his leadership, along with the support of the management team, Charlie can deliver exceptional value and competitive financial returns for all pool partners.”

Jonathan Lee, outgoing CEO of Tankers International, added: “I believe that we have built something incredible at Tankers International, and I’m very proud to have played my part in building an evolutionary new model for tanker pooling, uniquely positioned to tackle the challenges and maximise the opportunities facing VLCC owners and operators. Since Charlie joined, it has been clear to me that he is the optimal choice to lead Tankers International as it continues to grow and evolve; I look forward to supporting him.”

Mette Frederiksen
In Editorial

A numbers game

VLCC owners are being forced to tackle a difficult trade-off between CII grades and commercial performance, but Matthew Smith of Tankers International explains how pooling can help overcome these challenges.

The recently introduced current Carbon Intensity Indicator (CII) regulations have several well-documented flaws. Industry experts have noted that the temptation to game the rules by increasing mileage on ballast legs to comply with CII regulations could be too much. In fact, many real-world scenarios exist in which abiding by the CII gradings will do more damage than good with increasing emissions to order to comply with the regulation.

CII scores remain somewhat shrouded in mystery, calculated using a complex system of measuring bunker fuel consumed as a function of distance travelled and hours underway, with this figure multiplied by a vessel-type specific factor. Some suggest that to secure the best CII rating, vessel owners could slow steam non-stop in ballast condition, which risks gaming the CII rating while emitting more emissions.

Although installing low-carbon technologies like air lubrication, engine efficiency technologies, voyage optimisation, and rotor sails will make a passing grade easier to attain, certain anomalies in the regulation mean that a highly efficient vessel will not necessarily have a good rating. For example, if that vessel sits at anchor for several days, it will require bunker fuel to power its generators, emitting CO2 yet travelling no distance. This inconsistency can result in a lower CII grade than an older, less efficient, but highly utilised ship.

Let us not forget the potential struggle as shipowners and charter counterparties play tit for tat. BIMCO’s CII operations clause is attempting to strike the right balance but it is certainly alienating segments of the industry. A group of 23 companies have formally written to BIMCO to voice their concerns. The signatories, which include Mediterranean Shipping Company and A.P. Moller – Maersk, are critical of the clause because it obliges charterers to be fully responsible for the CII performance of the ships they charter. In contrast to actually tackling emissions, shipowners must meet an agreed gCO₂/dwt per nautical mile, as charterers are reluctant to sign away precious freedoms.

 

The dilemma for shipowners

Regardless of industry concerns, the CII regulations as currently written came into force on the 1st of January, so shipowners must accept this. So, in the race to decarbonise, shipowners now face a tough trade off between CII grades and commercial rewards.

Shipowners must understand exactly how to operate their fleet to achieve a good CII rating; ensuring charterparty agreements incorporate these requirements.  They will need to find the right balance between financially lucrative but CII-negative fixtures and CII-positive voyages that may not achieve the same profits. At the same time, they may face a choice between cash flow and installing efficiency technologies. This challenge can create a trade-off between CII scores and short-term profitability.

Owners and operators with large cargo bases and long-term relationships with large-scale charterers have a distinct advantage. This relationship allows them to plan voyages ahead with more confidence – and ensure that they have a mix of different voyage types that meet appropriate standards.

The trade-offs will be more extreme for shipowners who do not have the commercial scale needed to negotiate favourable terms and maximise vessel utilisation. Limited cash flow effectively bars small or cash-poor shipowners outside of a pool from longer routes, which are often the most profitable, as the shipowner must pay for bunkers before they receive freight payment from a charterer. These routes are inherently CII-positive, as they maximise constant-speed travel and minimise time at anchor.

Charterer demand represents an enticing reward for decarbonisation. Yet, they cannot justify owners’ decisions without properly understanding their vessels and operational profile. Most tanker owners do not have sufficient flexible operational resources to complete these complex assessments and may have to build out new teams at an additional cost. Added to that, inconsistent earnings in the spot market can make it difficult for owners to plan technical retrofits profitably, as drydocks can coincide with particular cash flow droughts. Clearly, tanker owners and operators are facing a headache in meeting CII targets at a time when all focus should be on ensuring the safe delivery of their cargo.

 

Strength in numbers

So how can tanker owners and operators navigate CII disruption while maximising profits? Pooling offers shipowners significant advantages, protecting shipowners against the challenges and setting them up for a seamless approach to any revised or future regulations.

The pooling model provides strength in scale. A pool’s strong commercial position enables greater flexibility in charter negotiations, and the collective pool of ships can maximise earnings. At the same time, the challenge of CII-negative voyages is minimised for any individual vessel as the volume of ships in the pool allows pool members to benefit from greater economies of scale, financial robustness and flexibility through greater utilisation across the combined fleet – helping them to mitigate any impact on CII grades.

Pools can take financially profitable CII-negative fixtures while maintaining grades across the fleet by spreading those voyages across the pool based on CII scores to date. By doing so, the pain of CII-negative voyages for any individual vessel does not mean a poorer pay day as the collective pool of ships can maximise earnings.

However, not all pools are created equal and the Tankers International pool goes one step further. It simplifies a shipowner’s role, providing regular cash flow based on their vessel’s earning potential in the current market conditions. By outsourcing commercial operations to the pool, shipowners can allocate this resource elsewhere, including evaluating and implementing low or no-carbon technology across their fleet.

The Tankers International pool also benefits from high-level technical information sharing provided by in-house forums that discuss insight on important innovations and new technologies – and the challenges that they have represented.

 

Decisions underpinned by data

Shipowners need to consider their vessel’s potential voyage impact on CII grades alongside, regional pricing, and supply and demand side market trends in actionable analysis. This challenge adds a layer of complexity, because while the CII regulations took effect this year, shipoweners will have to wait until January 2024 to understand their score. At the same time, those scores will be out of date for 364 days every year and will only reflect an average up until the end of the last reporting period. This lack of data means that vessels with falling grades will not see that reflected in their score for some time, while vessels with improving grades will not have that reflected in their grade until the start of the next calendar year.

These inconsistencies limit CII’s usefulness, so indicative voyage CII scores are included in the Tankers International VLCC Fixture app, showing an estimated letter grade and comprehensive calculation for every VLCC voyage fixed in the spot market. The new CII reporting mechanism draws on extensive knowledge of the global VLCC fleet to benchmark any vessel’s bunker consumption against the closest similar vessel out of the 250 vessels that have traded in the Tankers International pool since 2000. This is set against a benchmark speed, which adapts based on our own data on averages across the sector and market conditions.

 

Strength going forward

There are legitimate questions about whether CII rules are fit for purpose. As global shipping has the potential to be involved in contradicted legal affairs, there are challenges ahead with the dramatic regulatory change stemming from CII, demanding a difference in how the sector needs to work together. The status quo is not viable, and tanker owners and operators need to explore new solutions to ensure that they meet CII targets, and pools are a clear example of how tanker owners can strike a balance between compliance and profitability.

 

Published in Bunkerspot in April 2023: https://t.co/pQPnVD0PJj 

Mette Frederiksen
In Insight

Tankers International launches CII update for popular VLCC fixture app

Our Head of Research & Insight, Mette Frederiksen, takes us through the development process behind the latest update to our popular VLCC app that provides an indicative CII rating and score for every voyage fixture based on Tankers International’s world-leading VLCC market data.

The volume of data that we all work with on a daily basis, coupled with the latest regulatory updates, means that it has never been more important to ensure that information is shared to enable transparency and collaboration. Therefore, introducing indicative voyage CII scores on the Tankers International VLCC Fixture app was a clear next step to supporting charterers in understanding their CII options and assisting shipowners and managers in understanding how others are – or aren’t – achieving good ship ratings.

Since the CII regulation entered into force in January 2023, there have already been some challenges with the regulation and concerns about how transparent this data will actually be. Our latest app update aims to allow shipowners, charterers, and regulators to openly see what issues they can identify using vessel CII scores and ratings. In turn, this can help to build informed policies and help regulators understand if and where reform may be needed.

The indicative CII scores are calculated based on internal speed and consumption data from vessels that have traded in our pool and dates back to 2000. This covers more than 250 VLCCs, of different ages, designs, and constructions. Where no version of a particular VLCC has previously been entered into the Tankers International VLCC Pool, the app uses the nearest possible match based on parameters including age, build yard, and engine design.

The CII feature also includes a ‘feedback’ tab for each fixture listing so that users can report any additional information or errors. This information can only be seen by the Tankers International team, and the messages sent cannot be seen on the app. Shipowners or ship managers who believe there is an error in our calculations should use this feature to report the error, and they can choose to provide a breakdown of actual representative data for the vessel.

The Tankers International app development team will verify this data before updating the vessel’s statistics, to provide the most accurate information possible.

This, alongside other data points like market demand and fixture frequency, is used by Tankers International to create an industry-wide benchmark speed. The Tankers International benchmark has been used and honed over two decades and provides incredibly accurate indicative figures for bunker consumption.

Given the ever-changing landscape of our industry and the uncertainty that these regulations have caused, it is now more critical than ever before that industry members have access to quality data, faster to support decision making for all stakeholders. This latest CII feature will allow users to integrate even more quality data and analysis into negotiations and strategic direction.  This additional layer of insight and market transparency will benefit the entire VLCC sector.

Mette Frederiksen
In Insight

The Year of the Rabbit brings good tidings for VLCC market

China is a key driver of the VLCC market. The sheer scale of the country’s need for oil and an infrastructure system built to accommodate large crude oil tankers means that shipping crude oil in the largest possible parcel sizes ensures economies of scale and a more cost-efficient transportation solution.

On the flip side, this also means that when the Chinese economy and the country’s demand for oil reduces, we see an immediate effect in the VLCC market. This demand slowdown was, in effect, what happened during the first half of 2022. While the smaller tanker segments benefitted from freight market shocks early in the year on the back of the conflict between Russia and Ukraine, in fact, the conflict did not directly impact the VLCC segment as this large vessel group rarely is involved in loading Russian oil.

In the early months of 2022 the VLCC market was significantly impacted by declining oil demand in China. The country was struggling with a resurgence in Covid-19 infections that caused new lockdowns and more travel restrictions. In addition, a slowdown in manufacturing activity caused industrial production decline, which reduced oil demand even further.

As a result of demand slowing and lockdowns impacting its industry, throughput in Chinese refineries collapsed to two-year lows as state-owned and integrated independent refineries ran at nearly 75% of capacity in April, while some private plants operated at just 50%, according to Platts. Intelligence from data provider Kpler shows that the reduction in refinery throughput boosted inventories in China which remained elevated through May, June and July before declining into the autumn.

This decline in refinery activity and resulting inventory build-up slowed down the country’s crude oil imports. At the same time, the price of oil was rising which did nothing to encourage more buying. As a result, we saw Chinese demand for VLCC tonnage decline. While we counted 107 monthly liftings destined for China in 2021 and a similar count in the first four months of 2022, this number dropped to an average of just 95 liftings in May, June and July.

In late summer, China began to re-emerge from its Covid restrictions. Increased industrial activity and greater freedom of movement both added to a demand surge in the second half of the year. This growth was further supported by new product export quotas that required refiners to demand increased volumes of crude oil. With oil demand improving and refinery runs increasing, we noted a significant impact on VLCC cargoes booked for discharge in China. In fact, we counted as many as 132 liftings in October, with an average of 125 monthly liftings in the final quarter of the year.

Looking back at historical data, we find an almost perfect correlation between both Chinese oil demand and VLCC liftings and refinery runs and VLCC liftings. It is, therefore, reasonable to expect this trend to continue. We can look at projections for oil demand and refinery runs in China to understand what we may expect going forward regarding VLCC activity bound for the country.

The latest estimates for China’s oil demand in 2023 peg growth levels at close to 6% on the back of the continued easing of Covid measures and economic recovery. We have seen a recent surge in infection rates in China and a temporary decline in demand. Yet, expectations are that this will be managed, and that demand will resume its growth trajectory from the second quarter. Likewise, China’s crude runs will initially be affected by the weaker demand picture, but this is also expected to reverse. We are therefore optimistic that China will continue to provide strong support to the VLCC market throughout the year.

We already count 120 global VLCC liftings destined for China in January and February, with approximately 60% emanating from the Arabian Gulf and the remaining from the Atlantic basin. While it is difficult to predict the exact number of liftings we will see in the VLCC space, the correlation theory indicates we can expect numbers to rise by around 5 cargoes per month compared to 2022 actuals. The great benefit to the VLCC market will come from the continuous pull of crude from the Atlantic basin, which comes with extra long tonne miles.

As one of the key drivers of the VLCC market, we continue to closely monitor China and the country’s energy data. The current outlook is positive with an economy in recovery mode, rising oil demand and a refining industry that is forecast to remain strong. The current crude trade flow mix into the country already supports a healthy VLCC market, and we look forward to a year of continuous growth from the economic powerhouse that is China.

Mette Frederiksen
In News

Tankers International launches a new CII feature for popular VLCC fixture app

Updated app will provide indicative CII rating and score for every voyage fixed based on Tankers International’s world-leading VLCC market data.

London, 6th February 2023 – Tankers International, the world’s leading shipping pool for VLCCs, today announced the launch of a new CII feature for its popular VLCC fixture app, which uses Tankers International’s comprehensive market data to calculate indicative voyage CII scores for all market fixtures.

The new CII reporting mechanism uses Tankers International’s extensive knowledge of the global VLCC fleet to benchmark any vessel’s bunker consumption against the closest similar vessel out of the 250 vessels that have traded in the Tankers International pool since 2000. This is set against a benchmark speed, which adapts based on Tankers International’s own data on averages across the sector and market conditions.

Carbon Intensity Indicator (CII) regulations came into effect at the start of January 2023, and represent an ongoing annual measure of the carbon intensity of a ship’s operations in terms of its greenhouse gas emissions relative to the amount of cargo carried and the distance travelled.

The Tankers International VLCC fixture app’s new CII functionality gives shipowners, charterers, and brokers insight into where a vessel or voyage is ranked on the CII scale, helping to make strategic chartering or operational decisions.

The app’s data will show a precise analysis and a breakdown of how a voyage CII score is calculated, so a shipowner will know how their voyage is ranked and where they may need to improve. In addition, if a voyage incurred a long idle period, the app will provide two clearly labelled and accurate CII estimates to account for this. Calculations are listed in full for PLUS and PRO users.

The Tankers International VLCC fixture app was first launched in 2014 and is the only publicly available source of fixture data for the global VLCC fleet. The app was re-launched in December 2021, and the new CII feature will allow users to integrate even more quality data and analysis into negotiations and strategic decision making. This added insight and market transparency will benefit the entire VLCC sector.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “Many people are still uncertain about how to keep up with shipping’s latest regulation, and we recognise the importance and need for quality data, faster to support decision making for shipowners, charterers and brokers. We foresee CII ratings impacting commercial decisions across the sector this year, and providing access to this voyage specific CII information will support key market stakeholders – helping them adhere to decarbonisation regulations and recognise market trends more quickly.”

The Tankers International VLCC fixture app can be accessed directly from any web browser as an ‘in-browser’ app here.

Mette Frederiksen
In Insight

2022 in review: the year of the VLCC market recovery

Now that we have closed the books on 2022, we are looking back at a year of ups and downs. The year began with high expectations of a long-awaited VLCC market recovery, and although the recovery was slow to kick off in the VLCC space, the year ended on a high. 2022 also brought added complexity to VLCC trading strategies, as a result of changing trade patterns and new regulatory requirements around the Carbon Intensity Indicator reporting.

We used our detailed VLCC fixture database to digest last year’s events and analyse how they helped to reignite the freight market for the largest tanker segment.

Join us as we review our internal cargo count dashboard.

 

First, we need to look at absolute growth in VLCC cargo numbers. Counting cargoes fixed in the spot market, we noted an average increase of 41 liftings per month in 2022 compared to the previous year – this represents a growth level of 19%! To provide greater context, this compares to an annual growth rate of circa 4% across the last 10 years, before the pandemic impacted the market. We saw a huge drop in oil movements during 2020 as Covid restrictions kept global mobility and productivity at a minimum. While we experienced some recovery in 2021, it was not until 2022 that the world truly began practicing “living with Covid”, and the effects of this are now mirrored in oil demand and thus tanker markets.  The year’s significant rise in VLCC cargo numbers resulted in a higher demand for VLCCs, as measured by days employed, which increased by 7%. This is in line with the 10-year average, excluding the two years impacted by Covid.

If we consider the various trade routes and how they have changed through the year, it becomes evident that significant growth was driven by the Arabian Gulf (AG) market. This load region saw an additional 35 monthly liftings across the year. This development runs parallel to the OPEC+ commitment to gradually add oil supply back to the market throughout the year. Following the announcement that the alliance would cease gradual additions, we noted a slight drop in cargo numbers from 186 monthly liftings in 3Q-2022 to 174 monthly liftings in the fourth quarter. This level of activity remains much higher than pre-Covid cargo counts of 160 in the fourth quarter of 2019, and it provides a solid baseline of activity for the VLCC market.

The second largest trade route in the VLCC market is West to East. This route encompasses all of the load regions in the Atlantic basin, excluding West Africa. Our fixture data indicates a monthly average of 38 liftings on this route – a slight decline from the previous year. This relatively low average, however, is marred by very low activity in the second quarter when we counted just 32 liftings per month. The driving force behind this was mainly at the receiving end, as China experienced a period of significantly reduced crude purchases.

Contrary to most other countries, China continued its zero-Covid policy through much of 2022 and lockdowns remained in place for longer than the rest of the world. China began to emerge from these restrictions over the summer months, and in combination with new product export quotas, the market saw renewed crude demand from Chinese refiners. This was the real catalyst for the buoyant VLCC market we have today. Not only did Chinese crude demand return, but China was sourcing much of the incremental barrels from the Atlantic basin. Tankers international recorded 46 liftings on the West to East trade lane each month in September, October and November.

The corresponding change in vessel demand on the West to East route indicates an overall decline. This is due to a more efficiently traded VLCC fleet, as more AG to West volumes emerged. VLCC owners were able to increasingly triangulate their trading between the AG, Europe and the Far East, reducing their overall ballast leg and, consequently the time that vessels are employed on the West to East route. The increase in vessel demand on the AG/West routes makes up for most of the decline on the West to East route.

Another game changer in 2022 was the resurgence of inter-Atlantic trading on VLCCs. On our dashboard these trades are listed as “West/West”. Europe has been pulling crude oil from new suppliers in the US, Brazil and West Africa, and on some of these routes, it became more economical to employ tankers from the largest segment. Since May, we count an average of 11 monthly liftings on these routes. The pull of VLCCs into Europe both from the Atlantic basin and the AG has given shipowners the ability to become more creative in the trading of their vessels, devising increasingly complex strategies to maximise the utilisation of their assets. This has been a welcome development!

Although the VLCC market was slower to recover than the Suezmax and Aframax markets and remained lacklustre through most of the first half, it has since returned with full force. It has been encouraging to see the market quickly adapting to added trading complexities and changing trade flows. We will continue to count cargoes and analyse any changes to trade flows through 2023. While we may not see the same uptick in absolute fixture numbers this year, tonne miles are set to continue on an upward trend with more oil moving long-haul. Given that development, we will see demand growth in the VLCC segment remain robust.

Mette Frederiksen
In News

Tankers International adds to VLCC Pool off the back of a buoyant end to 2022

Pool growth continues as complex market conditions highlight the value of pooling.

Tankers International, the world’s leading shipping pool for VLCCs, has grown rapidly throughout 2022, bringing the total size of the Tankers International fleet to 66 VLCCs, across 8 pool partners.

The Tankers International pool has added more modern tonnage throughout 2022, bringing the average age of the fleet down whilst increasing its size. Tankers International’s 66 strong fleet now has an average age of 7.8 years. The specialist scrubber pool has grown to 34 vessels from 19 vessels at the start of 2022 with an average age of 6.8 years decreasing from 7.5 years.

Tankers International pool partners benefit from improved cash flow, allowing the vessels to trade on longer, more profitable routes, alongside streamlined operations and the strong market intelligence of Tankers International. The unique pooling model leverages the collective strength of the pool, in data, scale, and size, to maximise earnings for pool partners.

Tankers International’s Scrubber Pool operates as a sub-pool, sitting within the Tankers International umbrella of specialised Pools. This means that it operates from a robust financial and commercial perspective whilst continuing to share resources across the entire Tankers International fleet.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “The VLCC sector’s recovery has been dramatic, especially during the second half of last year. However, this recovery has arrived alongside changes in trade routes as our market becomes more complex. As a result, we have seen the value of pooling continue to increase. We are incredibly pleased that the Tankers International VLCC pooling model continues to provide exceptional value for our partners.”