Looking forward, ahead of the present slump in shipping, the Captain is often inquired on the market segments that are in best shape, comparatively speaking, to fare bravely the market and the sectors that likely will recover first. Hope springs eternal, as they say, and the present anemic freight market notwithstanding, there are asset classes that are better positioned to weather the stormy markets.
Looking at vessel supply data, there is no question that, in general, the asset classes with the bigger sized vessels, whether tanker, dry bulk or containership, seem to be the most oversupplied. For instance, according to the Captain’s logs, there are approximately 570 VLCCs in existence and about another 145 such vessels on order, so the outstanding orderbook is approximately 25% of the worldwide existing VLCC fleet. There are almost 520 capesize vessels on order out of an existing fleet of 1,290 vessels (40% outstanding orderbook as percentage of the existing fleet), and 435 post-panamax containerships on order out of an existing population of 910 vessels (48% outstanding orderbook). Sliding down the scale, panamax crude tankers have approximately 13% outstanding orderbook (53 vessels on order vs 410 on the water), MR tankers stand at about the same with 13% (175 vessels on order out of a worldwide fleet of 1290 vessles), handysize dry bulk vessels equal to 22% (with 670 on order out of an existing fleet of 3,035 vessels), handy containerships stand at only 8% (105 vessels on order vs 1,280 vessels in existence), and finally, stainless steel tankers bear 9% outstanding orderbook (95 vessels on order vs 1,050 vessels on the water.) It is abundantly clear from the above data that the market for bigger vessels will be affected in the future more heavily by new vessels entering the market than the markets for smaller-sized vessels.
Looking to assessing future tonnage supply, besides the new deliveries that will enter the market, the age profile of the existing fleet, and thus the rate at which vessels are expected to leave the market, by way of demolition, etc, is also a very important factor. The average VLCC is approximately 7.5 years old, and so is the average capsize vessel; for post-panamax containerhsips, due to the ‘new-ness’ of their design and market economics, the average vessel is only two years old. However, the average MR tanker is already 12 years old, the average handysize dry bulk vessel about 16 years old, the average handy containership approximately 12 years old, and the average stainless steel tanker around 10 years old. Again, the data make it abundantly clear that, in general, asset classes of big sized vessels consist of relatively young fleets (as a result of persistent increased ordering and newbuilding activities during the booming years of the cycle), while smaller sized vessels are in general much older and, one might say, past their prime.
There is no question then that as far tonnage supply is concerned, VLCC, capsize dry bulk and post-containership vessels will likely have to face oversupplied markets for some time to come, and any demolitions will be limited and painful as these fleets consist of relatively modern tonnage. There is always of course the question of tonnage demand, which can keep busy and absorb tonnage oversupplies, but again, vessel demand is at the mercy of direct market forces, and a subject profound enough to deserve its own discussion in subsequent posting.
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