Tanker owners have been hit with a deluge of new deliveries in the first month of the year on a scale never seen before, heaping further pressure on an already weak freight rate environment.
At an unprecedented scale, 5.5m dwt of crude oil tanker capacity – up 220% from January 2016, has already been delivered in 2017, according to preliminary data from VesselsValue.com.
January 2017 already accounts for 22% of the previous year’s total deliveries of crude tankers. In comparison to the totals of 2015 and 2014, this 2017 figure amounts to 48% and 51%, respectively.
The lion’s share of January deliveries were taken by 12 VLCC deliveries, which totals 3.68m DWT and represents 67% of the month’s total. Additionally, 943.000 dwt of suezmaxes and 903,500 dwt of aframax vessels were delivered.
From January 2014 until January 2017, demolition amounts to only 8m dwt, just 2.2% of the current crude oil tanker fleet.
Commenting on the statistics, Peter Sand, chief shipping analyst at global shipowning body, BIMCO, said: “This record-high crude oil tanker delivery growth is troubling, and worsens the balance between supply and demand instantly, due to sluggish demolition in this segment.”
This is a classic case of basic supply and demand as taught in business school 101. And until such time that the market reaches a state of equilibrium, rates will continue to be under pressure directly and adversely impacting Opex. If there is no upward capacity on revenues, the only way to address profitability is on the expense side highlighting the need to dig deep and look further down the income statement on a line by line basis.