Large product tanker orderbook

The Clarkson Shipyard Monitor for August 2007 contains a large orderbook for product tankers. Clarkson lists tankers 10,000-59,999 dwt, but 97% of the orderbook in this segment is 35,000 dwt- 53,000 dwt and only four orders are between 19,000 dwt and 35,000 dwt. The 538 ship orderbook is some 24 m dwt, while the total scheduled phase-out (of single hull tonnage) in this segment is some 317 tankers of 12 m dwt. Some 85% of the required phase-out will occur in 2010 or later, while 78% of the deliveries will occur before 2010 (in dwt terms).

Looking at the total supply and demand situation, a surplus is building up even assuming a 6% demand increase. No additional deliveries are needed before 2012 to balance the market under these assumptions. Here it is assumed that all single hull tankers will be phased out by 2010, but some must be expected to continue to trade until the age of 25, or maximum 2015, irrespective of how the market develops. As new tankers will be coming on the market almost every second day, it is hard to see any recovery in this market unless there are special circumstances upsetting the market. With a tight refinery situation and a great deal of arbitrage trading, there will most likely be shorter upturns. However, the surplus of tonnage is likely to build up in 2008-2009.


The latest International Energy Agency (IEA) projection is 1.8% oil demand increase in 2007 and 2.55% in 2008.


Gasoline imports to the U.S. over the last couple of months have been at a record high, but the average for the first 32 weeks of this year was still below that of the same period in 2006. Also total U.S. product imports over the period are slightly below the level for the same period in 2006. Product imports to Europe are below last year's level for the first five months of the year. Total product imports to Europe have increased by some 5% in the first five months of the year, according to IEA.


The market may benefit from new export refineries in India/Middle East as from around 2010, particularly if products from these refineries are exported to the U.S. and Europe. Reliance in India says that will be its targeted market when the new large Jamnagar refinery comes on stream.


According to OPEC (Organisation of Petroleum Exporting Countries), the Middle East, India and China are the focus for major refining capacity expansions over the rest of this decade, and have announced projects totalling almost 8 mb/d. While the developments in China are mainly driven by local demand, in the case of the Middle East and India, it is a combination of rising demand and the policy goal of turning these regions into major refining and product export centres. These two regions are home to the biggest new grassroots refinery projects, notably Jamnagar in India, where existing capacity is expected to double by 600,000 b/d, Al-Zour in Kuwait and Yanbu and Al Jubail in Saudi Arabia.


In addition to these regions, there are also substantial projects announced for the U.S., totalling up to 1.3 mbd of new capacity.


Contact: Erik Ranheim