<article><p class="lead">Freight rates are expected to rise significantly on the back of tighter tonnage supply, increased slow steaming and stronger demand for oil shipments following the implementation of International Maritime Organization (IMO) 2020 regulations, according to speakers at the Association of Shipbrokers and Agents Cargo Conference in Miami today.</p><p>Very large crude carrier (VLCC) time charter equivalent (TCE) rates are predicted to rise by 55pc to $53,750/d, Suezmax rates by 43pc to $37,850/d, Aframax rates by 43pc to $29,550/d, long range (LR) 1 tanker rates by 32pc to $25,375/d, LR2 tanker rates by 39pc to $30,050/d and medium range (MR) tanker rates by 26pc to $20,400/d, according to data cited by Navig8 managing director Jason Klopfer.</p><p>Several factors will contribute to tighter tonnage supply, Phillips 66 manager of global strategy Mike Reardon said. First, increased dry docking for scrubber installations will take a sizable chunk of ships off the water, as roughly 16pc of the global tanker fleet is expected to be fitted with scrubbers by January 2020, Reardon said. Next, the use of <a href="https://direct.argusmedia.com/newsandanalysis/article/1974763?keywords=floating%20storage%20euronav">ships for floating storage of compliant fuels</a> will further contribute to more limited tonnage supply. Lastly, IMO 2020 is likely to increase the scrapping of older tonnage, as it will not be financially viable to retrofit those vessels with scrubbers, and they won't be as competitive if bunker prices are higher.</p><p>Increased slow steaming — when a vessel sails slower to burn fuel more efficiently and decrease sulfur emissions — will also support freight rates, Reardon said. Voyages will take longer on average, which will essentially tighten tonnage supply because fewer vessels will be available for prompt loading at any one time.</p><p>Demand for oil shipments is also expected to rise following IMO 2020. First, increased refinery runs will lead to stronger demand for crude shipments. IMO 2020 is predicted to increase global refinery throughputs by 1.6mn b/d once the regulations come into effect in January. </p><p>IMO 2020 will lead to a 2mn b/d increase in marine gasoil (MGO) shipments, because refineries will not be able to produce enough to meet demand, according to data cited by Klopfer, and half of this MGO will be transported by ships. For 2020, this will lead to an additional 436 MGO cargo exports to Asia, 291 to Europe, 148 to Latin America and 53 to Africa.</p></article>
