could increase tanker demand by more than 2%
SHIPPING
Phase 1 could increase tanker
demand by more than 2%
In its Phase 1 trade document, China pledges to
increase US exports of energy products by a total
amount of USD18.5bn in 2020, then USD33.9bn,
reaching USD52.4bn by 2021. Energy is defined as
LNG, crude oil, refined products (including LPG) and
coal. The value of US exports of crude, LNG and LPG
in 2017 was USD6.7bn, of which two-thirds was crude.
Assuming crude will account for 50% of the increment,
US exports to China by 2021 could rise to 1.3mbpd.
The pure substitution effect should see additional
demand for ~30 VLCCs, or more than a 2% increase in
crude tankers demand. Similar effects should be seen
also for LPG and LNG. We see this as a clear positive
catalyst for shipping shares in Tankers, LNG and LPG.
Distribution key. We are yet to find out how the USD52.4bn will be allocated between
the energy products. However, needless to say, you are looking at quite substantial
figures. The value of US exports of crude, LNG and LPG in 2017 was USD6.7bn, of
which two-thirds was crude, according to data from the United States International Trade
Commission (USITC).
Crude was USD4.3bn in 2017. According to USITC, China imported 218kbpd of US
crude in 2017, which was 20% of total exports, at a cost of USD4,304m. China’s share
of total US exports dropped to 11% in 2018 and was 4% in 2019, indicating that tariffs
started to have an effect. However, average US sailing distance was just marginally
down between 2018 and 2019, as other Asian countries increased their imports.
LNG was USD0.4bn in 2017. According to data from USITC, China imported 2.1m
tonnes of US LNG in 2017, or 14% of the total, at a total cost of USD424m. China took
8% of US volumes in 2018, dropping to 1% in 2019. The sailing distance was negatively
affected, dropping by 9% YOY in 2019, also fuelled by lower commodity arbitrages.
LPG was USD1.9bn in 2017. According to USITC, China imported 4.9m tonnes of US
LPG, which was 14% of total US exports, at a cost of USD1,929m. China’s share of US
exports dropped to 7% in 2018 and further to 1% in 2019. However, as other Asian
countries increased their exports in 2019, sailing distance was flat in the period.
2.5 VLCC required for every 100kbpd switched from Europe to China. If we assume
crude to account for 50% of the incremental Chinese exports in value terms, China
should see 2020 imports of US crude worth USD13.6bn, increasing to USD30.5bn in
2021. Assuming an oil price of USD65/bbl, this implies 570kbpd in 2020 and 1,285kbpd
in 2021. Assuming exports to China would reduce exports to Europe, sailing distance is
14k nautical miles rather than 5k nautical miles. For every 100kbpd substitution, you
would see an additional demand for ~2.5 VLCCs. Thus, the increase from 2019 levels of
113kbpd to 2021e of 1,285kbpd would see an incremental demand for ~30 VLCCs, or
more than a 2% increase in crude tank utilisation
Phase 1 could increase tanker
demand by more than 2%
In its Phase 1 trade document, China pledges to
increase US exports of energy products by a total
amount of USD18.5bn in 2020, then USD33.9bn,
reaching USD52.4bn by 2021. Energy is defined as
LNG, crude oil, refined products (including LPG) and
coal. The value of US exports of crude, LNG and LPG
in 2017 was USD6.7bn, of which two-thirds was crude.
Assuming crude will account for 50% of the increment,
US exports to China by 2021 could rise to 1.3mbpd.
The pure substitution effect should see additional
demand for ~30 VLCCs, or more than a 2% increase in
crude tankers demand. Similar effects should be seen
also for LPG and LNG. We see this as a clear positive
catalyst for shipping shares in Tankers, LNG and LPG.
Distribution key. We are yet to find out how the USD52.4bn will be allocated between
the energy products. However, needless to say, you are looking at quite substantial
figures. The value of US exports of crude, LNG and LPG in 2017 was USD6.7bn, of
which two-thirds was crude, according to data from the United States International Trade
Commission (USITC).
Crude was USD4.3bn in 2017. According to USITC, China imported 218kbpd of US
crude in 2017, which was 20% of total exports, at a cost of USD4,304m. China’s share
of total US exports dropped to 11% in 2018 and was 4% in 2019, indicating that tariffs
started to have an effect. However, average US sailing distance was just marginally
down between 2018 and 2019, as other Asian countries increased their imports.
LNG was USD0.4bn in 2017. According to data from USITC, China imported 2.1m
tonnes of US LNG in 2017, or 14% of the total, at a total cost of USD424m. China took
8% of US volumes in 2018, dropping to 1% in 2019. The sailing distance was negatively
affected, dropping by 9% YOY in 2019, also fuelled by lower commodity arbitrages.
LPG was USD1.9bn in 2017. According to USITC, China imported 4.9m tonnes of US
LPG, which was 14% of total US exports, at a cost of USD1,929m. China’s share of US
exports dropped to 7% in 2018 and further to 1% in 2019. However, as other Asian
countries increased their exports in 2019, sailing distance was flat in the period.
2.5 VLCC required for every 100kbpd switched from Europe to China. If we assume
crude to account for 50% of the incremental Chinese exports in value terms, China
should see 2020 imports of US crude worth USD13.6bn, increasing to USD30.5bn in
2021. Assuming an oil price of USD65/bbl, this implies 570kbpd in 2020 and 1,285kbpd
in 2021. Assuming exports to China would reduce exports to Europe, sailing distance is
14k nautical miles rather than 5k nautical miles. For every 100kbpd substitution, you
would see an additional demand for ~2.5 VLCCs. Thus, the increase from 2019 levels of
113kbpd to 2021e of 1,285kbpd would see an incremental demand for ~30 VLCCs, or
more than a 2% increase in crude tank utilisation