Asian shipyards filling to capacity with boxship and LNG carrier newbuilding contracts, coupled with tanker owners exercising restraint in ordering this year, are set to halt the crippling effects of tanker oversupply and create a better balanced tanker market from next year onwards.
The improved medium-term outlook for the tanker market is supported by high levels of demand for oil and oil products from energy-hungry emerging economies.
“It’s just a matter of time,” said Teekay Tankers chief executive Bruce Chan, referring to the anticipated better balance in supply and demand for tankers.
He said shipyards in South Korea are already brimming with orders for boxships and other vessel types such as liquefied natural gas carriers, so yards do not require tanker orders “to keep themselves busy”.
According to Mr Chan, Chinese yards are also reaching capacity due to newbuilding orders from segments other than tankers, which should prevent a flood of new tanker orders this year.
As capacity at these yards stays stretched, product and crude tanker owners have been holding back from placing orders, consciously opting to exercise restraint after overordering during the boom years and also last year.
According to Capital Product Partners chief executive Ioannis Lazaridis, there have been about 20 medium range tanker orders over the last few weeks, which is “definitely not overordering”.
“It’s the lowest ordering in the tanker sector and among the lowest in the shipping industry,” he said during the Capital Link webinar.
Teekay Tankers agreed that the number of orders placed this year has been low.
Data from London-headquartered shipbroker Clarksons shows that 28 oil tankers have been ordered so far this year. This compares with 233 in 2010, 131 in 2009 and 425 in 2008, according to Clarksons.
Overordering in the past has made owners more “disciplined”, said Tsakos Energy Navigation chief executive George Saraglou. Owners would like to see more recovery in the market before placing orders, so “speculative” orders will be unlikely, he said.
Tsakos Energy Navigation will place an order only if a vessel needs to be replaced, and only then as long as there is a charter attached to the newbuilding order, said Mr Saraglou.
Given the lower orderbook, the tanker market will start to improve in 2012, he noted.
Mr Chan said lower ordering this year will lead to a “classic cycle rebound in the next few years”.