The Evolving Tanker Market

Twenty years ago the seven oil majors owned outright a quarter of the world's tanker tonnage, and at the same time controlled an additional 50 percent through long-term time charter commitments. Today, they own less than nine percent, and have little tonnage on long-term charter. This represents a massive structural change for the oil tanker fleet. The impact on ownership, chartering and operating policies is detailed and analyzed in a 198-page report from Drewry Shipping Consultants entitled The Oil Tanker Fleets. Faced with the continued poor profitability of shipping and demands for higher safety standards, oil majors have conducted a thorough review of their attitude towards shipowning and operating in the 1990s. The relationship of shipping independents and oil majors is now at a turning point, the report concludes. The average age of their fleets ranges up to 20 years, but all fleets contain tonnage which will need to be renewed in the near future. With crude oil demand forecast to increase gradually to the end of the millennium and the oil majors continuing to deplete their owned fleets, both the size and market share of the independent shipowners looks set to increase even more. However, many owners' resources have been depleted by the decline in the underlying value of their assets by weak trading returns from the spot market. This is evident from the downturn in new orders and fierce competition from charters. The big question to be answered is: how many shipping independents can continue to survive in an industry that has proved almost incapable of producing returns from trading over the past 20 years? The report concludes that if the cream of the shipping independents are unable to negotiate good long-term charter contracts, then their compatriots will continue to suffer at the hands of the spot mai ket. The eventual outcome of BP's well-publ cized proposal to time-charter newbuildin Suezmax tankers is a case in point. It is to b hoped that independent shipowners have learne a lesson from the last cyclical peak. Low seconc hand values allowed conventional industry wis dom to be: buy vessels cheaply, watch asse values and earnings will take off. Middle-age tonnage was being sold at inflated prices in hop that it would be around long enough to benef from an improvement in industry fortunes. For more information on the Drewry report Circle 9 on Reader Service Card