While tonnage oversupply will continue to play a major role towards keeping tanker freight rates subdued for the most part of 2013, it seems that the worst is over for the market, as the orderbook has now shrunk to a mere 12% of the existing fleet, which suggests that the pace of supply growth will lose some steam after 2013. With less than 13 million dwt of tanker tonnage ordered in 2012, Drewry said this week that it expects the tanker fleet to grow at relatively slower pace of about 3% CAGR during 2013-17, to 487 million dwt. This is down from 14.9 million dwt and 36 million dwt in 2011 and 2010 respectively.
Meanwhile, in its tanker market outlook, Nordic American Tankers said that while seaborne imports of crude oil into the US have decreased over the recent past, "the travel distances of crude oil coming into the US have increased, meaning that ton-miles for crude going to the US has seen a small increase. Going forward, shale oil and tar sand oil projects may impact the US and Canadian oil sector. These projects are vulnerable to reduced oil prices. Demand for vessels and accordingly our freight rates are partly driven by ton-miles, that is to say that not only volumes of crude, but also the voyage distance affects tanker demand. Moreover, recent data indicates that ton-miles are showing growth in line with the fleet development for 2013 as a result not only of economic recovery but changing trade patterns leading to longer voyages" the company said.
It added that "the European economies are making progress in agreeing to uniform banking terms and financial assistance packages. European economies, however, continue to run significant deficits and face mounting debt, while resistance to deficit reduction measures remains strong. The economies of the Far East generally show continuing growth, although at a slower pace than before. Annual crude imports into China totaled a new record high in 2012. Tanker market rates are also affected by newbuildings that enter the markets, increasing the supply of vessels. Increased scrapping impacts supply in the other direction.
According to Drewry Maritime Research, "tonnage demand in the tanker market increased 0.6% to 325 million dwt in the fourth quarter, and Drewry expects this to increase by 2.6% to 330 million dwt in 2013. However, 26.4 million dwt of fresh tonnage is due for delivery in 2013. The last quarter of 2012 saw the tanker fleet expand by 4.3 million dwt to reach over 412 million dwt.
Capacity expansion in the dirty tanker segment was faster than for clean tankers, at 3.4% compared with 2.5%. In both categories, almost all the additions took place in larger vessels segments such as VLCC, Suezmax and LR2. The fleet of smaller vessels shrank, suggesting that owners are being attracted to the economies of scale offered by larger vessels. Deliveries continue to outpace strong demolitions, which reached their second highest level for five years with over 11 million dwt demolished.
A persistent weakness in freight rates, in conjunction with high bunker prices, limited availability of credit and very low earnings have discouraged owners from placing new orders, despite falling prices. With earnings at unattractive levels, owners remained reluctant to take deliveries as delivery slippage reached 38% in 2012. Even the strategy of yards to attract owners by offering vessel designs with improved efficiency in the scenario of rising fuel cost does not seem to be working at this stage" said the consultant.
As a result, it predicted that "a good recovery in tonnage demand is anticipated from 2014 onwards with a gradual improvement in the global economy and a corresponding increase in oil demand, particularly in Asia, the Middle East and Latin America. A gradual increase in average voyage length due to the shift in trading patterns should also result in higher tonnage demand for oil tankers. Demand is forecast to rise steadily at about 5% a year through 2013-17, to about 405 million dwt. Tanker utilisation is thus expected to improve after 2013 as demand growth gathers steam and supply growth slackens, which should translate into improved earnings for owners" Drewry's report concluded.