Tanker orderbook could still spell oversupply in 2000

April 3, 2000
At yearend 1999, prospects for newbuilding in the world's tanker fleet would suggest a disturbing oversupply, according to Clarkson Research Studies' semiannual Shipping Review & Outlook.
Deliveries of very large crude carriers (VLCCs), such as the 308,500-dwt Frank A. Shrontz owned by Chevron Corp., were up 4.3 million dwt at yearend 1999 from a year prior. Photo from Chevron Corp. as it appears on Bermuda-based Frontline Ltd.'s website.
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At yearend 1999, prospects for newbuilding in the world's tanker fleet would suggest a disturbing oversupply, according to Clarkson Research Studies' semiannual Shipping Review & Outlook.

"After the 20-year record contracting of 58.3 million dwt of ships in 1997, in 1998 the shipyards saw orders slump by 32% to 39.8 million dwt. Just enough to maintain capacity. So far this year, the yards are just managing to hold this level-to the end of August 1999 orders were only 5% down. After a miserable first quarter when only 4 million dwt was booked, there was a brisk pickup in the second half of the year.

"Market sentiment has changed direction in the last 6 months. Tanker ordering is running 27% below 1998. In contrast, bulk carrier contracting, egged on by the prospect of market recovery, has jumped 42%," Clarkson says.

"The orderbook, when expressed as a percentage of the fleet,ellipse has remained steady over the last 6 months. In September 1999, the percentage of the fleet on order was 15.1% for tankers, 10% for bulk carriers, and 17.6% for container ships," says Clarkson.

Orderbook statistics

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The size of the orderbook for each tanker category as of December 1999 has decreased slightly, compared with figures from a year earlier (Fig. 1).

Showing some of the largest declines was the orderbook for the Aframax (80,000-120,000 dwt) fleet. At yearend 1999, the most recent figures pegged the vessels' orderbook at 4.7 million dwt, or 9.6% of the fleet, Clarkson notes. This compares to an orderbook standing at 8.8 million dwt at yearend 1998, or about 18.9% of the fleet.

As of Sept. 1, 1999, says Clarkson, the Aframax fleet consisted of 511 vessels totaling 48.8 million dwt, which was up from 498 vessels of 47.5 million dwt only 6 months earlier. The Aframax fleet has shown growth, notes Clarkson, due to a large number of ordering batches that took place during 1997-98.

Only slightly higher than Aframax orderbook was the Handy class (<60,000 dwt) orderbook, which reached 5.2 million dwt at yearend 1999 vs. 6.8 million a year earlier; these figures were a respective 8.8% of the fleet vs. 12%.

The VLCC (200,000 dwt) orderbook fell slightly to 19.2% at yearend 1999 vs. 19.5% for the year earlier. Clarkson says that despite the "very poor state" of the VLCC freight market during 1999, the orderbook has continued to grow.

At yearend 1999, the VLCC orderbook stood at 23.8 million dwt vs. 24.2 million dwt at yearend 1998.

National Iranian Tanker Co. placed most of the newbuilding contracts, which consisted of 10 newbuildings in 1999, according to Clarkson. And, given the market conditions, Clarkson says, the number of VLCCs in lay-up surprisingly showed no change during March-September 1999.

The Suezmax (120,000-200,000 dwt) orderbook also showed a slight decline year-on-year as well, reaching 6.6 million dwt in 1999, down 0.3 million dwt from yearend 1998. As a percentage of the fleet, 1999 figures were down from 16.9% to 16.6%.

Vessel deliveries

Regarding Suezmax deliveries as of the third quarter of 1999, Clarkson noted: "Unfortunately for an already depressed Suezmax market, we are expecting more deliveries over the course of the next 3-4 months. So far this year, we have seen a total of 10 vessels of 1.5 million dwt delivered to the fleet. Over the next 3-4 months, we should see owners take delivery of almost the same amount again, 1.3 million dwt."

Actual Suezmax deliveries at yearend 1999 were 2.2 million dwt.

Deliveries of VLCC vessels, at yearend 1999, reached 7.6 million dwt, up from only 3.3 dwt at yearend 1998, says Clarkson.

At the end of 1999, deliveries of Aframax vessels reached 4.3 million dwt vs. 2.9 million dwt at yearend 1998. And, roughly 2.8 million dwt of Handy class vessels were delivered in 1999 compared to 2 million dwt delivered a year earlier.

Consolidations abound

The consolidation trend that swept through the industry during 1998-99 made its imprint on the tanker sector as well. "It does appear that owners of VLCCs are heeding the example of the oil industry and taking steps towards what looks like consolidation," notes Clarkson.

Frontline Ltd., Bermuda, the tanker company owned by John Fredriksen, succeeded in a 2-year pursuit of ICB Shipping. Also, notes Clarkson, Japanese firms Nippon Mitsubishi Oil and Cosmo Oil formed an alliance to create a 33-VLCC fleet in hopes of weathering Japan's oil industry deregulation.

In addition, A.P. Moller, Eruonav, Frontline, Overseas Shipholding Group Inc., Osprey Maritime, and Reederei "Nord" Klaus E. Oldendorff agreed to pool their VLCC fleets into a combined effort called Tankers International LLC.

"Tankers [International] will manage a fleet of exclusively modern VLCCs numbering initially 38 vessels. As the participants take delivery of newbuildings, and vessels are redelivered from period charters, the fleet is expected to exceed 50 vessels by 2002," the combine said.