Gibson: Low Bunker Price Erodes Eco-Tanker Advantage, Supports Tanker Fleet Growth

Only 34 tankers have been scrapped over the last year.

Low bunker prices have limited demolition activity, and helped the tanker fleet to grow by 203 units / 21.9 million dwt over the last year, having eroded the advantage of so-called eco-tankers and kept older tonnage in useful service, according to Gibson Shipbrokers' (Gibson) latest mid-year report.

"The strength of the tanker market during the low oil price regime has meant that owners have had little need to even think about scrapping as bunker prices headed south improving their margins still further," wrote Gibson.

"Eco-ships no longer held any significant advantage as legislation on environmental issues continued to keep its distance resulting in demolition numbers falling to a mere 34 tankers (2.5 million dwt) over the past twelve months."

Data from Ship & Bunker shows that as of Monday the average bunker price for key grade IFO380 in the primary ports is down $80 per metric tonne (pmt) year on year to $261.50 pmt, and in that time has fallen to lows of under $110 pmt in some major ports including Rotterdam and Houston.

Gibson also noted the impact of new regulations requiring all ships with a keel laid after the end of 2015 to comply with International Maritime Organization (IMO) Tier III NOx standards, a fact Ship & Bunker previously reported had spurred 2015 newbuild orders to seven-year highs.

Indeed, according to Gibson, some 218 of the 366 orders placed last year (69 percent) were contracted in the 2nd half of the year.

"Appetite for new orders across all the tanker sectors has evaporated this year despite renewed falls in pricing and the mounting pressure on shipbuilders to fill their forward orderbook," Gibson noted.