The tanker orderbook has descended to historical lows as investors shy away from being left with stranded assets in the race to achieve greenhouse gas (GHG) emissions targets
At 44.9M dwt at the start of October 2020, the tanker orderbook was equivalent to a historical low of 8% of the fleet. Only 12M dwt of tanker orders have been placed so far in 2020. As it stands, the tanker orderbook is at its lowest level since 1997, according to Clarkson Research Services (CRS). The product tanker fleet is at the lowest level for 25 years.
The reasons for the lack of investment is clear. In the short term, the impact of the Covid-19 coronavirus pandemic on demand for crude oil and oil products has skewed demand and set up fluctuations in trade flows.
In the longer term, the requirement to meet ever-lower GHG emissions creates a difficult-to-manage risk of a 10-year-old tanker asset in 2035 being uncompetitive with newer low-carbon vessels. None of the main tanker building shipyards are even close to being able to offer a low or zero-carbon neutral VLCC, although some, like HHI, have exhibited VLCC designs with rotor sails and other low-carbon propulsion technology.
The available alternatives are methanol and LNG-powered large tankers. Independent shipbrokers SSY noted in its latest report that “Of the total tanker contracting (for vessels 10,000+ dwt and excluding chemical tankers) in the first 10 months of 2020, about 10% of the orders were placed for LNG dual-fuelled vessels.”
CRS noted that in particular, 45% of the crude Aframax tanker orderbook is LNG-capable. This reflects the high number of shuttle tankers in that sector which are destined to work in low-carbon emission regions.
Owners and operators in Asia are leading the change to LNG dual-fuel power. “Of the 55 LNG dual-fuel tankers on order (which includes three VLCCs, nine Suezmaxes, 22 Aframaxes, four LR2s and three MRs) 27 units are to be owned by Asia-based shipowners and financing institutions, and the remaining vessels will be under European ownership” reported SSY.