The ordering boom in 2006-08 landed the crude tanker market with near record deliveries and robust fleet growth in the subsequent years. A return to strong contracting in 2014-15 has led to a surge in delivery volumes of crude tankers. In 2017, crude tanker deliveries are expected to top 25m dwt, breaking records in the process, and continuing their role as a key feature of market dynamics this year.
Rising From The Ashes
Following the ordering boom in 2006-08, crude tanker deliveries in the subsequent four years surged to average over 28m dwt p.a., supporting crude fleet expansion of 5% p.a. on average. However, after a significant drop in contracting levels in 2011 and 2012, with just 32 contracts placed in 2012, the lowest annual number in decades, crude tanker deliveries subsided to bottom out at 8.4m dwt in 2015, the lowest level since 1997. However, sentiment rallied on the back of improving markets, and orders surged again in 2014-15, with 200 crude tankers ordered in 2015, the most since 2006. As a result, deliveries in 2016 rebounded to 21.0m dwt, and with demolition at rather muted levels, the pace of crude fleet development accelerated to 5.9% y-o-y.
Stoking The Flames
The resurgence of crude tanker delivery volumes did not let up in 1H 2017, with deliveries up by 69% y-o-y at 16.2m dwt. Much of this growth came in January, when 22 crude tankers of a total 5.1m dwt were delivered, the highest monthly volume on record. 12 of these deliveries were 3.6m dwt of VLCCs, the highest monthly volume since April 1975. In total, 29 VLCCs of 8.8m dwt were delivered in the first six months of the year. However, this number has been surpassed by the 34 Suezmax vessels of 5.3m dwt delivered in the same period, already exceeding the total amount delivered in full year 2016. The capacity of Aframax deliveries is also already over 75% of those delivered in full year 2016. Overall, these deliveries have driven crude fleet growth of 4.0% in the first six months of the year.
The Fire Keeps On Blazing
Currently, nearly 26m dwt of crude tanker tonnage is expected to be delivered in full year 2017, facilitating projected crude tanker fleet growth of around 6%. Suezmax deliveries are presently expected to reach over 8m dwt, the highest annual volume on record, contributing to projected Suezmax fleet growth of 9% this year, the fastest pace since 2011. Meanwhile, VLCC deliveries are currently expected to reach 13.5m dwt in the full year, accounting for around 50% of crude tanker deliveries this year. This is down from 70-80% over the previous 3 years, as Suezmaxes and Aframaxes account for a greater share of the delivery total (Aframax deliveries are also projected to be at their highest since 2011 this year). Looking to 2018, deliveries are projected to total over 20m dwt, contributing to nearly 4% supply growth in the crude tanker fleet.
So, ordering in 2014-15 appears to have been enough to generate three strong years of deliveries, although of course ‘non-delivery’ may vary in the short-term and this would have an impact. Regardless, in 2017, delivery records have been broken and more are expected to be set. Overall, it appears that deliveries will remain a key driver of crude tanker market dynamics this year and next.