Eco Tanker Orders Adding to Oversupply Problems

Scorpio says fuel-efficient tankers help handle the rough market

Shipowners are rushing to reduce their costs by ordering fuel-efficient tankers, but the trend may exacerbate a glut of refined crude oil tankers on the market, Reuters reports.

"Obviously the new eco-ships have an advantage, but today we don't need more orders so everyone has to show restraint if we want the freight rates to improve significantly in the next 24 months," said Harry Vafias, chief executive of Greek tanker company StealthGas Inc.

"We won't be ordering vessels soon since we are worried about the already-big order book," he added.

The cost of bunkers was reported to be as much as 70 to 90 percent of the cost of operating a product tanker, and declining margins starting in 2008 have pushed the industry to focus on efficiency.

The newer designs and technology of the so called "Eco" tankers can help cut fuel costs by more than 20 percent, according to Scorpio Tankers Inc., who said in October that deliveries of five fuel-efficient newbuildings over the past few months are helping it overcome challenges in the current market.

"Going forward, we see limited supply growth and think Scorpio Tankers is well positioned to take advantage of stronger utilization and improved freight rates," said Jarle Sjo, chief investment officer of Oslo-based ODIN Forvaltning AS, a Scorpio investor.

Data from shipping lender Danish Ship Finance shows that the global product tanker fleet grew by 2.5 million deadweight tonnes (dwt) in the first eight months of the year, while only 1.3 million dwt were scrapped.

"The fleet is very modern, there are very few scrapping candidates, and for the rates to pick up we need less ships not more," commented StealthGas' Vafias.