2018 has been a challenging year for tankers with rates bottoming out in the third quarter of the year, and finally ushering in a long-anticipated market recovery.
Due to weak industry returns and attractive scrap prices, owners provided some relief to the oversupplied market by turning to demolition.
This year has marked the highest number of tanker demolitions over the past fifteen years, with over 150 tankers above 25,000 dwt being sent to the recycling yards, according to Gibson’s data.
On the other hand, the situation on the supply side has been fairly slow, with over 25% of the tanker orderbook scheduled for delivery in 2018 ending up slipped into next year. Furthermore, there has been a decline in new tanker ordering activity, with investment in new tonnage falling to one of its lowest levels seen over the past decade, the shipbroker said.
“Only VLCCs bucked this trend, with new tanker ordering largely driven by speculative investment, with a focus on scrubber equipped tonnage. Nonetheless, even VLCCs have seen notable slowdown in ordering activity in the 2nd half of the year, with just 3 tankers ordered versus 34 between January and June,” Gibson added.
Due to the growing interest in scrubber technology in the VLCC segment, the shipbroker estimates that by the end of 2020 scrubber equipped VLCCs could reach over 20% of the current fleet on water.
Even though market fundamentals were bouncing back in 2018, there are some headwinds to be anticipated in 2019, mainly from the threat to demand from the OPEC production cuts, as well as substantial tanker delivery scheduled for next year.
“We will hope to see a similar slippage in 2019 delivery dates as the one witnessed this year; however, there could to be less willingness to do so, particularly for scrubber equipped tonnage. On the upside, the expectations are for further increases in long haul trade out of the Americas and higher trading demand in preparation for the IMO2020,” Gibson pointed out.