Outlook for tankers

At the end of the year, the Tanker Department had 8,045 known ship days for 2008. The department’s goal is to continuously be able to maintain a cover of approximately 35-40%, and at the end of the year the cover was 34% for 2008.

 

NORDEN expects lower average freight rates in 2008 relative to 2007. The balance between supply and demand is assessed to remain very fine, and any unforeseen events – strikes, weather conditions, refinery breakdowns, political unrest etc. – could thus result in temporary, but major, rate fluctuations as seen in previous years.

 

The positive development of demand is expected to continue due to general global economic growth and rising global oil consumption and, not least, changed transport patterns toward longer transport distances. The growth in global oil demand in 2008 is expected to be 1.9%, against 1.4% in 2007 (source: IEA). The growth is expected to be strongest in non- OECD countries (+4%), including Asia, the Middle East and Africa, while the increase in the OECD countries’ consumption is expected to be somewhat lower (+1.2%).

 

The changed transport patterns, which in recent years have led to longer transport routes and thus increased demand for tanker tonnage, remain an important factor. The most important factors behind the changes are stricter specification requirements of refined products in the USA and the EU and, not least, major bottleneck problems in terms of refinery capacity. Both lead to longer transport routes as the growth in the demand for oil products must be met by refineries which are often located far from the consumer regions.

 

The total net increase in the global tanker fleet in 2008 is assessed to be 7.2% (source SSY). In historical terms, this is a high growth rate, but it is in line with the increases seen in the past 3-4 years, when the market has been able to absorb the growth while maintaining attractive rates.

 

The combination of the highly attractive tanker market experienced in recent years and the IMO rules on the phasing-out of single-hulled tankers by 2010 has caused the order book in the tanker segment to rise to a historically high level of approximately 40% of the existing fleet. Accordingly, the relatively high rates of fleet increase seen recently seem set to continue in the coming years. This trend, however, is partially offset by the fact that 23% of the fleet consists of single-hulled tankers, which are to be phased out from 2010 (source: Clarksons). But up to and including 2010, the high rate of fleet increase may result in periodically lower tanker rates. NORDEN will keep a close watch on market trends, particularly whether the market continues to be able to absorb such major fleet growth rates.

 

According to the IMO phase-out rules, single-hulled tonnage must be phased out no later than 2010, but individual flag states and port states may allow single-hulled vessels to continue operating or enter the country’s port, respectively, up to the end of 2015 or when the vessel is 25 years old. It is thus uncertain whether the phasing out will take place mainly in 2010 or whether major flag states and port states will permit continued operation and port entry. Single-hulled tankers today operate from the Middle East to Asia, primarily China, South Korea and Japan. These countries previously indicated that they will permit continued port entry for single-hulled tankers, but an oil spill off the coast of South Korea from the tanker HEIBEI SPIRIT in December 2007 caused the South Korean authorities to consider banning single-hulled vessels already with effect from the end of 2010.