At the time of the 'Erika' incident, the fleet
capable of transporting products from 25,000 - 50,000 dwt was over 950
units with a capacity of around 35 million dwt. If one assumes that the
market was more or less in balance at this time, based on current
construction one will have to wait until 2007 to reach an equivalent fleet
in terms of numbers and transport capacity. It is therefore hardly
surprising that the market has been able to absorb a hundred ships being
delivered without any real difficulty.
At the end of the year, the fleet of product
The average age of these vessels was respectively
11.5 years for the 'handysize' and 9.5 years for the 'MR', the result of
the rapid rejuvenation of the fleet especially on sizes above 40,000 tons.
As to vessels in
the larger category, 31 'LR' ships have been delivered since 2000 for a
total capacity of over 2.15 million dwt, of which 12 are over 80,000 dwt.
More than 160 ships of over 50,000 dwt were on order at the end of the year
for a total capacity of 12 million tons.
The small number of ships being demolished is a
worry. In such a healthy market, owners of old vessels not acceptable to
Majors still continue to find gainful employment with certain traders and
charterers in the East of Suez area. This state of affairs not only slows
down the modernisation of the fleet, but introduces a distorted competition
to the detriment of owners who have made an effort and impose a strict
selection of their tonnage and yards with which they work.
It is time that all the charterers in the
Far East follow the
example of the EU and put into application the guide lines of the IMO.
Demand for product tankers has been influenced
principally by two factors: the American and Asian demand on one hand, and
the utilisation of nearly half of the fleet of modern ships in the
transport of fuel oil and crude oil on the other hand.
American demand was a particularly influential
factor in the liveliness of the transatlantic market, due to the shutdown
of crude production and refining capacity in Venezuela which lasted until
the end of April and affected American imports up till the last quarter.
American imports therefore had to look to other sources, which were either
European or Asian refiners.
At the same time, Chinese demand lead by a growth
of 7- 8% p.a. but also Japanese imports linked to a healthy economic
recovery, help support the market throughout the first half.
It seems likely that this is a well established
trend; crude production within the American zone is no longer rising and
refining capacity in the area has reached a plateau. Without new
installations, made difficult by environmental considerations, revamping or
upgrading of existing plants is not sufficient in itself and the zone will
become increasingly dependent on product imports. Meanwhile, despite
financial uncertainties, the economy within the Asian zone should grow
strongly over the next 5 years.
Extending product voyage movements together with
the tightening of security measures cannot but help favour the employment
of modern product carriers.
In conclusion, although it is inevitable that the
large number of vessels due to be delivered over the next 2 to 3 years will
have an affect on the product tanker market, the combination of tighter and
more restrictive measures together with an improvement in the world
economic climate should allow the market to absorb this new capacity.
In the longer term, there is a concern that
owners may be tempted to take speculative risks: the cash-flow being
generate by tax friendly systems (with as a prime example the German KGs)
allows investors to take up-front profits by refinancing their delivered
units and to fund and place new orders.
In counterbalance, the rise in prices for
newbuildings and the full capacity of shipyards act as a constraint on the
excessive appetite of owners.
Overall, even if the perception of the
supply/demand tonnage balance is less clear in the long term, the market
should remain in good shape at least until 2005 and possibly 2006. And if
it transpires that the 'useful life' of a product tanker should be reduced
from 22 / 25 years to 15 / 18 years, owners could then anticipate a
supportive and favourable market until 2010!