Over-Ordering Déjà Vu: 24 VLCC Ordered So Far This Year

Very Large Crude CarrierImage Courtesy: DSME

Robust interest in newbuilding tonnage is putting a major strain on the tanker market recovery as owners continue last year’s ordering spree that resulted in 57 very large crude carriers being ordered.

A total of 24 VLCCs have been ordered so far this year, Gibson Shipbrokers said in its weekly report, adding that there are indications that there would be more to follow suit.

The trend is worrying, as VLCCs have the largest orderbook of all tanker size groups, at 16 pct relative to its existing fleet. Namely, just this year 40 tankers are set to join the global fleet with 57 scheduled for delivery in 2019.

“Even with an anticipated slippage, deliveries next year will mark the 4th year in a row of heavy delivery profile. Of course, if scrapping continues at similar robust levels seen recently, fleet growth will slow down in the near term. However, once all the prime candidates are out of the market for good, the pace of demolition will slow down,” Gibson said.

Demolition of veteran VLCCs so far this year has broken the last year’s record, with 21 very large crude carriers reported to have been scrapped in 2018.

According to Gibson, quite a few of those units reported for scrap or viewed as likely demolition candidates in the short term, have been absent from the trading market in the recent past. Some have been involved in floating storage, others showed little signs of trading activity, at times for extended periods.

The shipbroker believes that relatively low nebuilding prices and expected savings from newbuildings fitted with scrubbers are likely to keep speculative ordering firm moving forward, especially from investors with limited exposure to the shipping industry.

“We remember all too well the surge in tanker orders back in 2013-15, in part financed with a helping hand from private equity and hedge funds. This eventually translated into over ordering in many segments. Will history repeat itself again?” Gibson concluded.

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