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Tanker sector not looking good

Tanker sector not looking good
Things are looking quite bleak for the tanker sector, which has been caught in duldrums during the first quarter of the year.


Things are looking quite bleak for the tanker sector, which has been caught in duldrums during the first quarter of the year.

Tanker owners have to cope with multiple negative factors, which are dragging rates downwards. Low oil demand and production are the main reasons, but this is not the only reason of concern. Perhaps the most dangerous issue to be dealt is the tanker fleet's potential growth. Gibson's latest report highlights this danger exactly. Indeed, analysts said that if tanker rates plunged , then owners would be looking for ways to dispose, renegotiate and postpone their shipyard contracts.

Gibson said that as ?one would expect, to date the drybulk market has seen the most cancellations, bu relatively few have emerged in either the crude or the clean petroleum products sectors. Perhaps, this is because the tanker market has only recently experienced the squeeze in rates already encountered in other sectors. However, we do anticipate more cancellations as the pressure intensifies on the market. What can confuse the issue is when owners cancel orders for legitimate contract violations, such as lack of refund guarantees or late delivery, but the shipyard announces that they intend to complete the vessel anyway?.

Still the fact remains that today's tanker orderbook stands at 30% of the existing fleet and Gibson anticipates more cancellations over the summer months. Gibson data indicates that Q1 saw the suezmax, LR2 [aframax] and MR fleet grow by some 2.5% in terms of numbers.

The VLCC fleet apparently expanded by 3.2% while the aframax segment showed the biggest increase at 4.5%. According to Gibson this is a substantial expansion in supply given such a short time frame. ?To put this into perspective, the total tanker fleet grew by 3% in Q1 of this year in a rapidly weakening market compared to the net growth of 1.4% in Q1 2008 in a strong and rising market,? it said.

Already, many owners are scrapping single-hull vessels, in an effort to curb tonnage supply in those lean times. Meanwhile, other owners are choosing to convert their orders from one type of vessel to another. For instance, some of the capesize orders are now switching to medium range and long range tankers, which appear to show more strength at the moment.


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