9th July 2010 - A Lot More New Deliveries - But How Many?
The tanker industry has been under enormous pressure because of the global recession and the high number of new deliveries. Discussions looking at future market prospects suggesting more doom and gloom often include the phrase ".....and there are still a lot more tankers to be delivered". This is undoubtedly true, but how many is "a lot more"?
Looking at MR product tankers of 25,000-55,000 dwt, annual deliveries rose from 111 in 2005 to 169 in 2008. However, it can be argued that this was ‘needed' to move increasing volumes in a growing market, as annual average MR spot earnings over 2005-08 were maintained at around $25,000/day tce (based on round voyage east and west trades). It wasn't until last year that spot earnings came under severe downwards pressure, when MR deliveries hit a record high of 186 at the same time the economic recession cut tanker demand. This resulted in average round voyage MR earnings of only $9,000/day in 2009. It has been from this position that the question of just how many more tankers are still to be delivered has been raised. At the start of this year we indicated that the number of scheduled MR tankers to be delivered in 2010 stood at 192, even more than in 2009! However, it was clear that actual deliveries would never hit this high. The undercurrent of negotiated delays between owners and shipyards meant an unknown number of 2010 deliveries would not arrive until 2011. In addition, cancellations of new orders was also a hot topic, if not quantifiable. Taking this into account, rather than the 192 scheduled deliveries, back in January we suggested that 2010 MR deliveries would be around 145 based on delays, and potentially as low as 110 if there were also significant cancellations. So far this year we have seen 73 actual MR deliveries, suggesting around 140-150 for the year as a whole is not a bad estimate.
Thus, there are "a lot more MR tankers to be delivered", but not as many as the headline schedule would indicate and certainly not as many as in the past 2 years. Moreover, with the slowdown in MR new ordering from mid 2008, we expect MR deliveries to be 100-125 next year (and only 50-75 in 2012). Therefore, the gains in MR supply will be far less this year and smaller still next year. If the economic bounce-back is as strong as indicated by the IMF in their latest report (published 2 days ago) at world GDP growth of more than 4% p.a. in 2010 and 2011, and the slowdown in MR fleet growth is as we forecast, then this year will be better for MR owners than last year (but still tough). With a smaller increase in the MR fleet in 2011 and sustained growth in oil and tanker demand, next year should be better still for owners.
