Cleaves Securities expects some 26m dwt of tanker tonnage to head for the scrapyard over the next two-and-a-half years.
The bank anticipates scrapping of 6m dwt this year, 12m dwt in 2021 and 8m dwt in 2022.
“Scrapyards have significantly reduced activity year-to-date due to the Covid-19 outbreak, but we expect scrapping to be a substantial factor in 2021 and 2022,” the bank’s head of research, Joakim Hannisdahl, said.
“In addition to a low earnings environment inducing scrapping, the implementation of IMO 2020 sulphur regulations also make a higher portion of the tanker fleet uneconomical.”
Clarksons Research estimates that tanker scrapping to date this year is just 1m dwt, with no VLCCs sent to the breakers yard so far.
“With tanker earnings also seeming to satisfy owners for the time being, an influx of tankers for recycling is not expected for some time, possibly until the last quarter of the year or beyond,” the UK shipbroker said in its latest weekly report.
Hannisdahl is forecasting tanker net supply growth of 3.5% this year, 2.2% in 2021 and just 1% in 2022.
Small orderbook
“With a very sobering level of newbuilding contracting in recent quarters despite stellar earnings, the orderbook has fallen to very low levels,” he said.
“We expect that uncertainty over future regulations and technology could keep ordering below modelled levels going forward as well.”
The current orderbook represents about 8.4% of the fleet on the water, which according to the bank are levels “not seen since January 1997”.
On the demand side, Cleaves Securities expects demand to contract by 5.5% next year as demand for oil transportation is negatively affected by lower oil supply and destocking of oil inventories.
However, it forecasts a “massive” 10% demand growth in 2022 as oil supply increases rapidly against the destocking cycle potentially ending towards the end of 2021.
Based on its utilisation, Cleaves Securities forecasts VLCCs will earn an average of $55,000 per day in 2020, up 33% year on year before declining to $23,000 per day in 2021.
