Heavy Orderbook May Not Be as Bad for Tanker Market as Initial Appearances Suggest: Poten & Partners

Poten & Partners says the tanker supply outlook for 2017 "is better than a cursory look suggests."

In its latest Tanker Opinion, Poten & Partners Inc. (Poten & Partners) says that, while the sector's orderbook remains high, "the outlook for tanker supply in 2017 is better than a cursory look suggests."

With the current delivery schedule of 2017's orderbook indicating that deliveries of new tankers are set to see their highest levels since 2009, the consultancy says it is uncertain how the market will be able to absorb such tonnage.

However, there are mitigating factors, suggests Poten & Partners, pointing to the difference between scheduled and actual deliveries as one of these key factors.

"History has shown that there can be significant discrepancies between scheduled and actual deliveries, especially in periods with a challenging rate environment," explains Poten & Partners.

The consultancy, which compared the level of actual deliveries against scheduled deliveries by segment through the 2005-2016 period, says very large crude carriers (VLCCs) have the highest average delivery ratio among various tanker segments with 80 percent - ranging from a high of 100 percent in 2006 and 2008 to as low as 53 percent in 2013.

"The high delivery ratio of VLCCs is not surprising. The orderbook data is more reliable, since VLCCs are mostly built at large, reputable yards and owners are typically well capitalised," said the firm.

Meanwhile, the product carrier orderbook statistics are said to present a less reliable picture, showing an average delivery ratio of around 50 percent.

Even during the strong freight markets of 2005-2008, Poten & Partners says the segment saw only 65 percent of its scheduled newbuilds actually delivered.

"Based on the historical variability of vessel deliveries and its apparent correlation with the freight market, 25-40 percent of the crude oil tanker orderbook and up to 50 percent of the product carriers scheduled for 2017 might not be delivered this year," concludes the firm.

In December, Poten & Partners said the tanker sector faced an all too familiar story of too many ships to meet demand.