June 02, 2022by Craig Jalal
Waiting for a bubbly order book to stabilize could be a winning strategy for the patient tanker operator
Elon Musk, supposedly the richest man in the world, raised $44 billion to buy Twitter. For much less, around $30 billion, it could have purchased the entire tanker backlog, according to figures from VesselsValue. This represents more than 700 tankers on order in a sector where the order book is down and where the supply-demand balance is tilting in favor of those with modern ecological tankers.
Although Mr. Musk is not focused on tankers, there are other well-funded organizations and companies that are beginning to take a keen interest in shipping. At the final session of the inaugural Chemical & Product Tanker conference, held in London in April, delegates learned from a well-connected source that a major non-shipping company was looking to alleviate the delivery problem otherwise. transparent from the manufacturer to the customer. Door step.
This logistical problem is evident in the masses of container ships waiting for berths in California. Not so long ago, at the start of the Covid-19 pandemic, these same waters were home to tankers serving as storage. The solution in the liner trades is to increase supply by ordering more container ships, driven by the boom in freight rates in this sector.
But that doesn’t solve the immediate problem and for that the logical solution is to support the offer. According to Chinese media, giant internet purchasing and logistics company Alibaba is taking ownership of ships after 10 months of chartering ships for its own purposes through related company Transfar.
Transfar’s stated objective is to take control of this part of the supply chain in the long term – a dedicated closed-loop network. What impact does this have on the tanker industry? The impact lies in the technological ambitions – skipping the decarbonisation of an aging fleet and building the lowest carbon fleet from scratch; could the oil sector do the same?
The current state of the tanker market is, with the exception of some Scandinavian and Japanese operators, still lagging – looking for ways to decarbonise the current fleet, without contracting low or zero carbon vessels.
We heard a lot about the different techniques and technologies available at the Chemical & Product Tanker Conference and one of the favorite questions asked by delegates was: in which sector to invest and why?
EA Gibson director Richard Matthews noted that tanker deliveries would drop in 2023 due to lack of orders and prices would rise, driven by demand for the aforementioned container ships. There are only about 10 new MR tanker build slots available in 2023 and prices have gone from a manageable US$32m each for a standard vessel to US$50m for a dual-fuel version low carbon emissions.
This has led to the bizarre state of over-inflated prices from an overly active container ship order book (approaching 25% of the current fleet) forcing new tanker prices higher as the backlog of tanker orders represents only 6% of the current fleet.
History has shown that when a shipping industry looks overdone – like the container ship industry today – the downfall will be quick and hard. Then, like the late 2000s, new construction niches will suddenly return, and the market and prices will drop. The first to order the latest tech tankers are the bravest, but tanker owners who sit and wait will be rewarded with lower prices and newer technology.