Tanker newbuilding ordering in the first half of the year fell to its second lowest level since 2011, according to a top US ship broker.
Only 61 tankers of all sizes were ordered in the first six months of 2019 – 41 in the first quarter and only 20 in the second quarter.
“Only the first half of 2016 was lower with 24, but that came right after a record year of 2015, when no less than 503 tankers were contracted,” said Poten & Partners.
The shipbroker said the 2015 ordering bonanza created the tanker oversupply that the market is currently suffering from.
However, it says the more modest ordering in recent years could set the scene for a more “balanced tanker market”
Orders for VLCCs have reduced the most, with only 14 VLCCs ordered in the first half of this year compared to 35 and 31 in the same periods of 2018 and 2017 respectively.
Poten said VLCCs have also benefited the most from the acceleration of demolition in 2018 after many years of little or no scrapping.
The brokerage said 33 VLCCs were removed from the fleet last year, which is about the same number as the prior five years combined.
However, VLCC demolition activity has slowed again this year with only four VLCCs sent to the breakers in the year-to-date.
Despite the slowdown in ordering, Poten said VLCCs still have the highest order book – 90 vessels – representing 11.2% of the current fleet.
For suezmaxes, the numbers are more modest with newbuilding contracts dropping dramatically since 2015, when a record 89 tankers were ordered leading to record deliveries and fleet growth in 2017.
Poten said just nine suezmaxes have been ordered in the first half of 2019 resulting in an order book of 45 vessels, or just 7.7% of the fleet.
The broker said aframax/LR2 ordering has been “modest” so far this year, while panamax/LR1 contracting was said to have “dried up completely”.
“It appears that the larger product tankers, which were very popular with owners in 2015 and 2016, have fallen out of favor,” said Poten.
The order book for aframaxes/LR2 combined stands at 9.2%, while the panamax/LR1 order book is only 5.9%.
Medium range product tankers seem to be the “product carriers of choice”, according to the broker, with the order book now standing at around 9.4%.
“While ordering has subsided from the highs of 2013 (204) and 2015 (111), there is a steady order flow of around 60-65 units in recent years,” said Poten.
“While 2019 seems to be a high delivery year, new additions are more subdued in 2020 and beyond.”
Meanwhile, there appears to be “limited demand” for the smaller handysize tankers, with only 24 vessels – or 3.3% of the fleet – on order.
Poten said that the overall outlook for supply growth is “relatively bullish” with ordering subsiding and some vessels in the order book unlikely to be delievered.
“Under this scenario, a normal winter market combined with some IMO 2020 induced dislocations and demand growth can lead to significant rate improvements,” it said.
"Provided that oil and tanker demand continue to grow - and demolition picks up as well - this reduction in ordering will typically sow the seeds for the next recovery in rates."
For the tanker market, Poten said the last good year with healthy rates was 2015, with rates across all segments depressed since then with 2017 and 2018 particularly bad.
"After a relatively strong winter market, rates in 2019 have dropped again and we are firmly in the summer doldrums now," it said.
"Shipowners are looking at the next winter market with a sense of guarded optimism, especially since it will coincide with the implementation of the IMO 2020 sulphur regulations on 1 January."
