subject: Vassilios Tsitsiringos Tanker Shipping Analysis [print this page] As could be imagined, tanker demand is generally a function of global oil demand growth. This in turn, is normally a function of global GDP growth. Also, it must be understood that tanker time charter rates and asset values (which are correlated) are therefore a function of oil demand growth. This can be translated into vessel tonnage mile growth relative to the net vessel supply.
It is also important to note that the contraction in the global economy and the shrinkage in aggregate demand post the Q3, 2008 Lehman Brothers financial crash caused tanker values to significantly drop from their 2008 peak. Tanker new building prices fell by some 50% (+/-) and second hand 5 year old tonnage by some 60% (+/-).
At the same time, global oil demand in Q1, 2008 was 87.4 million barrels per day and by Q2, 2009 demand dropped to 83.9 million barrels per day; a decline of 3.5 million barrels per day or (-4.1%). Hence you see the drop in tanker rates and values.
As a consequence of the above trend, one can easily see the global GDP growth between 2004 and the first half of 2008 with tanker rates and asset values escalated. Financing availability and high leverage provided by the banks caused a surge in tanker new building orders geared to the expected continued growth in oil demand. The majority of these new buildings, plus some pick up in ordering during the first half of 2010, are scheduled for delivery during the balance of 2010 through 2012 subject to delivery slippage, contract cancellations due to funding availability and/or other factors.
Although the tanker order book shows a robust 2011/2012 delivery schedule the available capacity (less scrapping, vessels used for oil storage, slow steaming, port congestion, etc. which will decrease overall capacity) is positioned to benefit from an increasing demand for oil particularly from the developing economies as the world economy recovers from the financial crisis
The likely outcome from a tanker supply/demand balance is that it may well take the next two years (+/-) to work through the supply side, albeit with rate volatility, to bring markets into a better balance post 2012. From the Q4, 2009 market trough in asset values, asset prices, for modern second hand tonnage have increased in the first half of 2010 by some 10.0%. However, rates have lagged and do not reflect the risk and level of capital deployed. To this extent asset prices are somewhat ahead in expectation' of an improving global macroeconomic picture driving, in turn, global oil demand.
