Tanker orders can be used to reflect oil shipping company managers’ expectations of future supply and demand. Managers often place new orders when future demand is expected to increase more than supply, on the condition that they expect to generate profit with the investment. Since tankers generally take more than two years to construct, and sometimes up to five years, the metric is often more relevant to long-term investment horizons.
Tanker on order falls just slightly
The number of tankers on order saw the largest increase in 2013 during the week ending April 19th, rising from 136  to 146 ships.When such a large increase is reported within a short period of time, it is natural for the figure to cool a bit as managers reassess future expected demand and supply balance, and hold off from adding new orders. Thus, for the week ending April 26th, the number of tankers on order fell by one vessel to 145.
This is an encouraging sign, given that the number of ships on order fell by three vessels the last time the industry reported a drop in the indicator. As it usually takes about two to three years for the ships to be delivered, a rebound in orders for crude tankers is not a quick fix, but a long-term one. In addition to companies such as Teekay Corp. (TK), Nordic American Tanker Ltd. (NAT), Ship Finance International Ltd. (SFL) and Teekay Tankers Ltd. (TNK), the Guggenheim Shipping ETF (SEA), which invests in major shipping companies worldwide, will benefit from this positive trend.
Fewer construct starts suggest short-term weakness
The decline in the number of tankers on order could be attributable to fewer construction starts as the industry continues to grapple with excess supply and delivery dates for new ships are likely farther out into the future. During the week ending April 26th, the number of ships under construction continued to fell further to 41 vessels.  Thus, in the short-term, tanker industry’s fundamentals may remain weak.