Despite the return of Iranian VLCCs to Europe, the primary orientation of Iranís fleet of VLCCs is to serve its Asian customers
We reported in January that since the lifting of sanctions at the beginning of 2016, the Iranian VLCC fleet, which had been kicking its heels off market as floating storage, had started to reappear on international trading routes. By the end of March, it became apparent that this strategy has been expanded. There are now 25 National Iranian Tanker Company (NITC) VLCCs active in the market, up from 22 in January and just 13 in October.
Following the imposition of sanctions in January 2012, Iranian crude oil exports fell from around 2.5 million b/d to around 1 million b/d. Prior to these sanctions, 20 per cent of Iranís exports went to Europe, but this outlet completely dried up, leaving Iran with China, India, Japan and South Korea as its only significant customers.
Exports have been gradually recovering since the start of 2016. In January to February 2017, Iranís exports averaged 2.435 million b/d, up from 1.377 million b/d in the corresponding period in 2016. Over the last 12 months, European customers have started to return Ė albeit slowly, with companies seeking detailed guidelines from the US on the new terms of trade with Iran before committing to engagement.
In February, the first two NITC VLCCs to call in northern Europe delivered mixed cargoes of Iranian heavy and light crude. The two vessels in question, Huge and Snow, went on to undertake voyages which showed that NITC was determined to further diversify its integration into the international market. It is believed that Huge went on to pick up a Mexican crude cargo from Cayo Arcas with its destination reported as Vadinar, India, while Snow loaded in northern Europe with its destination reported as Singapore.
Despite the return of Iranian VLCCs to Europe, the primary orientation of Iranís fleet of VLCCs is to serve its Asian customers. Since the start of the year, we estimate that Iran has completed 15 VLCC voyages to China, eight each to India and South Korea, and one voyage to Taiwan.
Although the lifting of sanctions is the main driver of the reactivation of Iranís storage fleet, Iran has also been empowered by its beneficial arrangement under the recent OPEC-led deal to cut production. The deal has given Iran scope to expand production at a time when most other OPEC countries have signed up to making production cuts. It is likely that Iran will continue to target its Asian customers, but will also look to continue to expand its portfolio of clients.
At the start of the year, Iran signalled its intention to seek a listing for its tanker company. The aim of such an undertaking would be in part to raise funds to allow for the repair and renewal of its fleet, as it seeks to continue its rehabilitation into the international community.
The above is an extract from an upcoming quarterly report on the outlook for the tanker market by Richardson Lawrie Associates Ltd (RLA), a firm of international maritime economists and business consultants. More information can be found at www.richardsonlawrie.com.