It’s that time of year when companies reveal their third quarter results and I am going to compare comments in the past few days from two tanker operators – Ardmore and Euronav – to understand where we go from here.
Both agree that the world tanker fleet is overtonnaged and that this has had an impact on rates but Ardmore’s CEO Anthony Gurnee has seen some positive trends in the product tanker market, leading to “a seasonal rebound this winter”. He said that the underlying fundamentals are positive and global oil demand growth is strong.
But on the supply side, he spoke of fleet growth and capital constraints. “As a consequence, we don't anticipate any major ordering activity until a recovery is well underway,” he said.
Euronav reported similar trends in the VLCC and Suezmax sectors. Its CEO Paddy Rogers reflected on the impact of new tonnage entering the market – 13 new VLCCs and 15 Suezmax deliveries during that quarter. He said these had helped drive rates to their lowest levels since 2013 and these rates “will remain dependent on the number of additional newbuild orders that are not needed by the market.”
“Not needed”, he said. Oversupply is killing the market, so stop ordering. But it’s more complex than that: many of these ships were ordered in a different climate; some of them possibly in anticipation of scrapping older tonnage when the ballast convention came into force, before installation dates were delayed.
Ardmore has a good approach. It has snapped up a 2008-built product tanker but is otherwise focusing on its operating performance and cost efficiency and has taken various corporate initiatives to prepare for the next market cycle.
Meanwhile, we find ourselves with excess tanker capacity sloshing about in the market. And sloshing is the last thing you want when you are operating tankers.