Not since the demise of the combination carrier has the tanker fleet experienced such swings in available supply
At the height of their popularity, the large combination carrier fleet’s switching from dry cargoes to oil cargoes could influence total available tanker supply by several percentage points per month, although back in the 1980s the changes could take weeks to analyse.
The process of assessing tanker movements is much faster today and Clarkson Research Services (CRS) is able to report changes in the fleet supply on a monthly basis.The monthly rate of year-on-year fleet capacity growth in the tanker sector in the last two years ranges from zero growth in August 2018 to 6% in October, according to CRS. These changes in the growth rate impact the way the new vessels are absorbed into the fleet. Active supply is the key factor, but it is difficult to analyse.
For instance, EA Gibson Shipbrokers’ head of research Richard Matthews, speaking at the Tanker Shipping & Trade conference, noted that 75 VLCCs have been delivered but many had a limited immediate impact on supply – many VLCCs carried oil products from the Far East and Middle East as first cargoes.
A new dynamic in the equation of tanker fleet supply is the scrubber, specifically the time taken to retrofit. Richard Matthews noted that EA Gibson had originally used 20 days as a reasonable assessment of the time taken. As 2019 progressed it became clear that various factors were combining to cause delays, and the assessment was doubled. This has an impact on the calculation of fleet supply.
The spike in earnings in October caused some owners to withdraw tankers from scrubber retrofit drydock slots to take advantage of the rates. As at the start of November 2019, CRS reported the adjustments between total year-on-year capacity and expansion adjusted for vessels out of service in the tanker sector is significant – 5.8% versus 4.3%.
Looking ahead, CRS expects 2% of the tanker fleet to be out of service in 2020 with scrubber retrofits. This will not happen all at one time, but coupled with an external factor such as new sanctions on Chinese tanker companies or further interference with the passage of tanker through the Straits of Hormuz, the result could be another spike in earnings.