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Wednesday, January 24, 2018

POINTS OF VIEW - Tanker supply depends on the eligible fleet

Despite a huge tanker newbuilding orderbook, and despite 75% of VLCCs, 66% of suezmaxes and over 50% of aframaxes being double-hulled already, the tanker market could avoid oversupply - partly because the tanker recycling figures are still comparatively high despite a good tanker market, but primarily because the ‘eligible fleet’ is still comparatively low.

Barry Rogliano Salles, senior tanker broker at Olivier Carage, explained to a Gas and Tanker Day organised this week by Bureau Veritas in London that the eligible fleet (as opposed to the total fleet) is what really dictates tanker supply. In 1998, before the Erika (and the Prestige) incident disrupted the status quo, the rules imposed by the chartering departments of major charterers excluded tankers over the maximum of 25 years, which gave an eligible fleet of, for example, 442 VLCCs.

By end 2000, the chartering and vetting departments had reduced their age limit to maximum 15 years, which slashed the eligible VL fleet to 300 units. By end 2002, with an unchanged age limit, the number had increased to 352. By end 2004, by which time oilco criteria will be stipulating double-hulled tankers only, the eligible fleet will be 339 and only by end 2006 will it have climbed to 377 going by the current orderbook, forecasts BRS. A similar pattern is shown for suezmaxes, aframaxes and MR product tankers.

In addition, BRS expects EU regulations and the Tasman Spirit grounding and pollution off Karachi to result in policy decisions East of Suez to limit the use of older tankers which have been displaced from European trades. Such further restrictions on trades for older single-hulled tankers will accelerate scrapping, tighten the fleet and increase demand for double-hulled tonnage.