The tanker market is primed for an undersupply issue moving forward, as a lack of orders and an increase of scrapping of vintage tonnage are bound to create shortages in the coming years. In its latest weekly report, shipbroker Gibson said that “against the backdrop of escalating environmental pressure and a political focus on developing renewable energy in recent years, we also see increasing warnings from oil producers and industry veterans that significant new investment in global upstream oil and gas development is needed by 2030 to meet market needs and to prevent a supply shortfall, even if demand growth slows toward a plateau in the longer term. For those in the tanker market, a similar trend has been in the making”.
According to Gibson, “the tanker fleet is ageing fast, ironically “helped” by virtually non-existing demolition over the past 12 months on the back of a dramatic improvement in tanker earnings and the gradual exit of predominantly ageing tankers into the dark fleet, destined to trade almost solely Russian barrels. Currently, 8% of the fleet over 25,000 dwt is over 20 years of age, with most of these units, particularly on larger sizes already operating outside conventional trades, including storage operations. Another 25% of the total fleet is in the 16-to-20-year bracket, with the proportion of Handy, Panamax and Aframax vessels in this age group being notably higher”.
“It is also a well-known fact that investment in new tonnage has declined notably in recent years, embattled by the pandemic-driven collapse in tanker demand, sizable increases in asset values and rapidly disappearing near term yard availability, concerns about long term oil demand and uncertainly about future vessels designs and fuels. As a result, at the start of this year, the tanker orderbook shrunk to its lowest level in at least two decades. Yet, there has been an increase in newbuilding appetite across almost all size groups so far in 2023. With Aframaxes/LR2s being the best performing asset since the war in Ukraine broke out, it is not surprising that this size group is in the lead, with combined orders for the year to date already at their highest since 2017. Investment in new Suezmaxes is the highest since 2020, whist MR orders for the year to date are just marginally short of last year’s total. We have also seen a few orders for Handy and LR1 tankers, following years of marginal, (if any) investment in these size groups. Most of the orders are for 2025 delivery, whilst there is a growing volume of tankers for delivery in 2026 or even later, as yard capacity sells out. Going forward, yard availability is highly likely to face further constraints amid booming LNG demand, whilst any fresh orders for large bulk carriers could also eat into tanker slots”, the shipbroker said.
“Although the recent pick up in orders is welcome, it still comes nowhere close to offsetting the number of vessels at or approaching their natural retirement age over the next four/five years. Demand for Russian trade is likely to remain strong, at least in the near term; yet, any new sanctions and/or international tonnage safety regulations (albeit unknown at this stage) may potentially make the age profile of vessels in Russian trade a bit younger. More importantly, Russian demand is finite and will reach saturation at some point, meaning that the focus will once again shift to demolition, regardless of whether vessels will be exiting Russian (or other sanctioned trades), or the mainstream market. Environmental and regulatory pressure will be pivotal here, whilst reputational risk of the major oil companies also has a role to play. When scrapping ultimately comes, the tanker industry may well find itself in a similar situation as the oil industry – with not enough tankers to meet existing demand”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide