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Sunday, December 17, 2017

Will shipyards be able to cope with replacement demand in 2009/2010?

The Clarkson World Shipyard Monitor (WSM) is an invaluable tool for the shipping industry providing a wealth of information. 

One big question is whether shipyards will manage to cope with the potential need for replacement of VLCCs in 2009/2010. 

VLCC deliveries by year and yard

 

Builder

2H05

2006

2007

2008

2009/10

Total

Mitsubishi H.I.

1

1

1

 

 

3

I.H.I.

2

2

2

2

1

9

Kawasaki H.I.

1

2

1

 

 

4

Mitsui S.B.

1

1

1

 

1

4

Hyundai H.I.

1

3

1

3

 

8

Nantong S.B.

 

2

4

 

 

6

Samsung S.B.

3

 

 

3

 

6

Hyundai Samho

 

 

6

4

 

10

Dalian New Yard

 

1

7

4

 

12

Daewoo S.B.

1

2

6

8

2

19

Universal S.B.

5

4

5

4

1

19

Grand Total

15

18

34

28

5

100

Source :Clarkson Shipyard Monitor

 

According to the WSM, there are only 11 yards building VLCCs today, four of which have 70% of the orderbook and eight of which have started to fill up their orderbook for 2008 and beyond. There are some 170 single hull (SH) VLCCs to be replaced, which means that another 70 must be delivered just to take care of the replacement. Based on an assumption of 34 deliveries per year 2008-2010 (which means another 68 new orders for the period), replacement demand can just about be met by 2010. 

The almost 500 VLCCs built since 1990 (including orders) have been built by 18 different yards for 93 different owners. Clearly the biggest VLCC builder has been Daewoo, which has built or has taken orders for a total of 100 VLCCs over this period. Hyundai is 2nd, having built 78, and IHI 3rd with 47. The last named has now joined forces with Hitachi Zosen and formed Universal Shipbuilding Corp. The peak delivery year was 2000 when 41 VLCCs were delivered by nine different yards. Daewoo delivered nine of these, which was the most by a single yard in one year. 

When using the peak year for every VLCC yard since 1990 as the potential capacity for 2008-2010, these yards may theoretically deliver 76 VLCCs per year. Taking into account that peak delivery since the 1970s has been 41 VLCCs per year and that peak deliveries are hardly possible several years in a row, 76 deliveries in a year seems highly unlikely. 

The most difficult aspect to estimate is what the increase in demand will be. If we assume there are today 460 VLCCs that are 95% utilised and demand increases by 4% per year until 2010 (it increased by more than 6% in 2003 and 2004), another 100 will need to be built 2008-2010 (assuming the orderbook for 2007 is full) in order to meet the increase in demand. A 3% increase in demand will incur a need for some 60 VLCCs and a 2% increase in demand will mean that another 40 VLCCs will need to be built in addition to the replacement demand. 

However, probably there will continue to be a market for SH VLCCs after 2010, as countries such as the Bahamas, Barbados, India, Japan, Liberia, Panama (case by case) and Singapore have left open provision for this. The INTERTANKO web site gives details of the different conditions imposed by flag and port states, but operators are still recommended to contact the administrations in individual cases.  

The tanker market is very dynamic and a great deal may change over the next few years. Until recently the consensus was that there was plenty of oil around and that the future oil price would stay in the USD 20 - USD 25 band. Things have changed quite dramatically in the oil market and this will no doubt also influence future tanker demand.

 

Contact: Erik Ranheim