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Is tanker contracting finally contracting?

Wed 11 Oct 2017 by Edwin Lampert

Is tanker contracting finally contracting?

There are signs that the tanker ordering boom that has done so much to sustain shipyards in difficult times is slowing.

Writing exclusively for Tanker Shipping & Trade, Barry Luthwaite of BRL Shipping indicates that 254 tankers, of all types, have been ordered so far this year, up from 188 vessels in mid-July this year. The deadweight has risen from 20,915,715 dwt to 28,825,158 dwt, but is countered by a fall in the overall order backlog from 1,082 vessels aggregating 98,286,463 dwt to 1,058 tankers totalling 95,274,649 dwt. Part of the backlog fall is due to the increasing rate of deliveries, which so far in 2017 number 319 vessels that have added 32,040,646 dwt to the global fleet.

Looking at the investment picture, Greece leads the way with 170 tankers committed, totalling slightly over 24 million dwt. Greece is followed by China (117) and Japan (110), but in each of the latter two cases many vessels are for the domestic construction account. Greek owners are phasing out older tonnage in favour of newbuildings.

The question now is will the newbuilding boom continue and overheat the market? Most owners have ordered in the faith that in 2020 (when new environmental legislation kicks in) many tankers will be sent for recycling because owners will not want to incur extra expenses to comply with legislation. Shipbuilders are likely to return to their main diet of bulk carriers. It is a fair bet that order intake for wet tonnage will drop, but the combined number of newbuildings and in-service vessels are more than enough to handle current and future demand.