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February 8, 2006

VLCC shortage ahead?

London shipbroker and consultant Galbraith's Ltd says that VLCC owners will face the paradox of strong growth in the worldwide VLCC fleet over the next four years and simultaneously strong demand to build even more VLCCs for delivery in 2009 and 2010.

Galbraith's predicts there could even be a severe shortage of tonnage if demand increases more than currently anticipated and if increasing reluctance to accept single-hull vessels escalates in the next few years.

In its just-published 83-page VLCC Market Outlook to 2010 and Fleet Ownership and Employment Analysis, Galbraith's notes, "The VLCC fleet has grown rapidly since the start of 2004. Although the current orderbook of 95 vessels, representing twenty per cent of the existing fleet, is relatively modest compared to some other sectors of the tanker market, fleet growth is expected to continue right through to 2009. The growth of the fleet is expected to put downward pressure on freight rates."

However a large number of vessels will leave the market as a result of regulations phasing out of single-hull tankers, leading to a strong requirement to build VLCCs for delivery in 2009 and 2010.

Galbraith's says that "the estimated building capacity for VLCCs is expected to be some 80-90 vessels in total for 2009 and 2010 combined. However, some owners appear reluctant at present to order vessels at prices that are currently close to twice the levels they were in 2002. If this situation persists we may see a very tight market in 2010/2011."

"If tanker demand grows more strongly than expected, and this is combined with a relatively low level of ordering and a situation in which more flag states, port states and charterers become unwilling to accept single-hull tankers, this would imply a severe shortage of tonnage," says Galbraith's.

The report provides a number of different scenarios for the future supply/demand balance, and looks forward to 2010, reflecting on both the requirement to order replacement tonnage and the capacity of shipyards to deliver these vessels.

A detailed fleet section provides full listings of all known VLCCs in the trading fleet and on order on January 1, 2006, reflecting the ownership (both beneficial and disponent) and employment of the fleet.

The report is available in either hard copy or pdf format at a price of 400 in the U.K., or US$750 elsewhere. For details contact: