LONDON, U.K.– A steep rise in vessel orders risks bringing the recent bonanza in oil tanker shipping to an abrupt end, according to the latest edition of the Tanker Forecaster, published by shipping consultancy Drewry.
Following recent modest growth, the oil tanker fleet is expected to reach new heights by 2016, climbing to 371 million dwt according to Drewry estimates. In 2014 fleet growth was flat, inching up just 0.6% as deliveries slumped 38% to 9.1 million dwt and demolitions remained high. But capacity expansion is gathering momentum and is expected to reach annual growth of over 4% in 2016, on the back of brisk vessel ordering which reached 22 million dwt last year.
Driving this resurgence in ship orders has been rocketing cargo demand, particularly floating storage, following the recent collapse in oil prices, coupled with moderating fleet growth. This has propelled spot rates to very high levels, with Drewry’s Tanker Earnings Index reaching 323.5 in January, its highest level since 2009.
“Notwithstanding the recent spike in demand, the primary driver of freight rate and earnings recovery in tanker shipping has been the decline in fleet growth,” said Rajesh Verma, Drewry’s tanker shipping lead analyst. “And if current ordering persists it will prove the sector’s ruin.”
Orders have been particularly strong in the VLCC segment on the back of growing trade on long voyage routes. The impact on capacity growth could prove particularly acute given the anticipated decline in demolition activity as the tanker fleet is now younger.
“However, the short term outlook remains very positive with modest fleet supply growth and strong cargo demand anticipated for 2015, which are expected to push tonnage utilisation higher still, “ added Verma. “With bunker prices projected to remain low we expect tanker operators to make the most of a buoyant market, for the moment at least,” he said.