2016 is off to a flying start when it comes to delivering brand new VLCCs from shipyards in South Korea and China to owners and investor across the globe. The six new VLCCs were delivered in a strong winter market. Having reduced slightly, since the turn of the year, VLCC average earnings currently sit at USD 50,000 per day, in early February.
For the full year, an additional 58 VLCCs are scheduled for delivery, but delays and postponements usually decrease that number to a certain degree. Taking that into consideration, BIMCO expects 37 VLCCs to be delivered during the final 11 months of 2016. South Korean shipyards will provide the lion’s share of these newbuilds.
Very Large Crude Carrier - Representative image: aukevisser.nl
Chief Shipping Analyst at BIMCO Peter Sand says:
“We have consistently expected 2016 to be a year of rising supply pressure in the crude oil tanker sector.
We have seen 6 VLCCs delivered in January, the most since November 2014.
BIMCO expects the highest inflow of new VLCC capacity to come into the market during the first and the fourth quarter. The same pattern is projected for suezmax and aframax crude oil tankers.”
Supply side growth to outstrip demand side growth
After three years of low but very healthy crude oil tanker fleet growth with an annual average of 1.5% from 2013 to 2015, BIMCO forecasts a fleet growth of 4.3% for the crude oil tankers in 2016. The biggest share of that growth is set to be within the VLCC segment. Demolition activity in all crude oil tanker segments is foreseen to be fairly low at 5 million DWT, higher than the 1.4 million DWT scrapped in 2015, but lower than in all the years since 2008, buoyed by strong markets.
The VLCC fleet currently consists of 654 tankers out of which 72 were built before 2000. Those 72 tankers represents 10.7% of total VLCC capacity. Average year of build for the fleet is 2006.
“The rise of crude oil transport capacity- stemming from the introduction of new modern tankers -being delivered into the active fleet is likely to result in a four-year high fleet growth rate in 2016.
BIMCO expects crude oil tanker demand in 2016 to grow by 2.5-3.5% depending on developments in the oil price, refinery throughput, global oil supply, geopolitical tensions and inventory changes.
Overall, we expect supply side growth to outstrip demand side growth in 2016, resulting in downside pressure on spot and time-charter rates for crude oil tankers”, adds Peter Sand.