• Friday, December 14, 2018

Tanker tidbits by Syd Heal - Subscriber Access Only

By BCShippingNews 27 April 2016

Just as 2015 was a disastrous year for the bulk carrier industry, a situation likely to continue through to 2017, so also was 2015 a memorable year for the tanker industry. This sector started to take off in the fall of 2014 after a long drought that had its start in the 2008 recession. The tanker freight market was very strong through 2015 and should remain strong through at least 2016 according to industry forecasters. That is until the usual spate of over ordering new ships goes from a trickle to a flood, as is now happening with VLCC and Suezmax, the main crude carriers being particularly hit. Some ordering is always essential to replace with ‘new for old’ but when ship owners go crazy, that is when they end up with severe financial indigestion as we have seen with dry bulk and are seeing again in containers.

Over ordering is not a new phenomenon. It is in fact like a pendulum that goes with the shipping cycle, but what causes it and who instigates it is quite hard to see clearly as many contribute to it and for different reasons. To be fair, over ordering when initiated may look like a touch of accretive genius when markets are prospering. It’s what can happen when trade falls off, freight rates collapse and demand diminishes in a significant way that what was a balanced fleet suddenly develops fleets of under-employed ships. The truth is that when demand and supply are in perfect balance, it is almost momentary and therefore seldom arises.

Photo above: Teekay's LNG's Yamal LNG Carrier new build, ice strengthened for year-round Arctic service. Photo source: Teekay Group