Few of the owners of large tankers have reported their results for the second quarter, but Euronav, the Belgian-based owner of a representative fleet of VLCCs and suezmaxes has recorded a loss of $31m for the period on top of a $11m loss in the first quarter. The company's spot VLCCs in the Tankers International pool earned a miserable $14,200 a day, and their spot suezmaxes $18,400 a day. Equivalent earnings in the second quarter last year for both classes were around $22,000 a day.

Reasons for the second quarter debacle are not hard to find. Apart from the chronic overtonnaging in both sectors, drops in US and Chinese oil imports are to blame for exacerbating a difficult situation.

Contrary to earlier predictions, Chinese oil imports have been dropping. Chinese oil imports in the first half fell 1.4% from last year's first half to 5.57m barrels per day, with possibly further falls as the year goes on. As China's economy slows, the deceleration of oil imports appears to be picking up. June's imports were 4.4% down year-on-year at 5.39m bpd.

China's oil imports had been expected to rise this year because of new refinery capacity opening but with domestic demand weakening these refineries will not be operating at full speed. There now seems little likelihood that earlier predictions of 6m bpd import levels being reached this year will come true. Since China has been providing around half the incremental growth in crude importation around the world, this is very bad news indeed for the VLCC market.

A further brake on VLCC demand going forward is the new Burma-China pipeline which, when it is up to its 440,000 bpd capacity will knock further tonne-miles off tanker demand. Using this will cut some 2,500 nautical miles off a voyage to Ningbo on the eastern seaboard of China. Although the pipeline will take time to reach capacity, any dent, however small, makes a bad situation worse.