Tanker orderbook suggests possible oversupply in 1999

At mid-1998, prospects for newbuilding in the world's tanker fleet would suggest a looming oversupply, according to Clarkson Research Studies' latest monthly Oil & Tanker Trades Outlook.

Categories

The size of the orderbook for each tanker category has increased substantially since mid-1997 ( see chart [86,408 bytes]).

VLCCs (200,000 dwt) have registered the most worrisome gains, says Clarkson, climbing to 20.6 million dwt, or 16.4% of the current fleet, from 11.8 million dwt in 1997, or 9% of the fleet.

Of greater concern, given the current market, is the Aframax (80,000-120,000 dwt) orderbook. The current orderbook shows 9.6 million dwt, or 21.2% of the fleet, Clarkson notes, whereas in mid-1997, the orderbook stood at 7 million dwt, or about 15% of the fleet.

The Suezmax (120,000-200,000 dwt) orderbook has jumped to slightly less than 19% of the fleet from 13% a year ago. Only the Handy-class (<60,000 dwt) orderbook has stayed relatively low at 11.9%.

Timing critical

This large volume of tonnage in the process of being built or on order is a concern for the shipping industry, Clarkson says. But perhaps more worrisome are the delivery dates for these vessels.

Mid-1998 forecasts for tonnage deliveries in 1999 stand at 9.7 million dwt for VLCCs, 3 million dwt for Suezmaxes, 5 million dwt for Aframaxes, and 3.5 million dwt for Handy-class. This contrasts with 1999 delivery tonnage estimated in mid-1997: 5.8 million for VLCCs, 1.9 million for Suezmaxes, 2.7 million for Aframaxes, and l.5 million dwt Handy-class vessels.

If one assumes each Aframax that comes on the market in 1999 to be l00,000 dwt, as Clarkson notes most forecasts have stated, 50 new vessels could be delivered to the fleet next year, along with 36 VLCCs.

Earnings at risk

With large amounts of new tonnage forecast for delivery through the rest of this year and into next, says the publication, vessels in most categories could find themselves hard-pressed to make satisfactory day rates.

Although 1997 average earnings at first may have seemed to justify orderbook buildup, year-to-year comparisons using year-to-date 1998 figures indicate something very different.

In 1997, both Suezmax and Aframax average earnings registered 23% gains from 1996; Last year, VLCCs averaged 31% and 47% earnings gains for vessels built, respectively, in the 1990s and 1970s. But Clarkson said that, apart from VLCCs, which posted respective 18% and 31% year-to-year earnings increases for these two vintages, 1998 figures are less sanguine for other categories: Suezmax earnings are up only 1% over 1997; Aframax earnings, down 27%; dirty-product tanker earnings, down 20%; and clean-product tanker earnings, down 37%.

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