The latest installment of a tanker pool, i.e. Nova Tankers has arguably managed to restore freight levels for VLCC tankers, by effectively adding bargaining power to ship owners. In a report, Intemodal’s Nikos Papantonopoulos examined the influence of shipping pools on the market, because, as it comprises of a more limited number of vessels and charterers, the results are more than conspicuous. According to Papantonopoulos, "over the past two years there has been a growth of demand in the AG market which has varied between 25% - 30%, while the total growth of supply has been around 10%. It looks like a booming market but numbers don't always reveal all. The 10% fleet growth was achieved thanks to a heavy scrapping programming which has been undertaken since 2009, culminating in 2011 were we even started to see as young as 16 years old vessels exiting the market. At the same time, on the demand side we have only just managed to see global crude oil trade volume match and surpass its pre-crisis levels. Nevertheless, the TCE for early February fixtures was at around 17k-18k USD per day while today it is almost 3 times that. We have even started to see fixtures in the WS 70’s range for Eastbound voyages. What could have possibly lead to such a sudden recovery in freight rates?" he asks.
The answer is, quite simply, the Nova Tankers pool. “This new VLCC pool has collected vessels from its partners Mitsui O.S.K. lines, Phoenix tankers, Maersk tankers, Samco Shipholding and Ocean Tankers. They are operating less than 10% of the total fleet but we are observing that the impact of their action had a appreciable change on market levels. We fully understand the argument that the start of the pool's operations is not the only reason for this improvement in rates; however nobody can deny that the pool created a balance between orders and spot vessels in the AG. As you know, the key factor for this rise is that the pool is able to provide owners with extra bargaining power by “hiding” some spot vessels as well as “presenting” fewer in each main trading area (i.e AG and USG). On the other hand, if more and more owners put their vessels in pools, then they will fail to secure as attractive a return because in order to fix a tanker on a higher rate they also need to simultaneously cover 3 or 4 hidden spot vessels. As such it could prove to be more beneficiary for an owner to be in a market where there is a pool but he himself is outside it” stated Intermodal.
He carried on by mentioning that “the relationship therefore between owners and pools is reversely correlated with shipping market's cycle because reaching the upper side of a cycle, owners will be keen to leave the pool in order to maximize their return from the firm spot market. Their exit from the pool will increase the competition, as owners are no longer working cooperatively, and as such freight rates will drop. It is usually during the downturns of the shipping cycle were owners will be distressed again due to low rates and keen to operate within a pool in an effort to survive. In conclusion, I would like to mention that pools are not enough to correct the market but they help better organize the efforts of owners and keep freight rates at more manageable levels during downturns. It’s not like owners rediscovered the wheel....but at the end of the day its one more arrow left in one's quiver” concluded Papantonopoulos.
In a separate report last week, Mcquilling Services had said that tanker deliveries (slippage = rate at which new vessels enter the fleet, compared with estimates) have been less than anticipated so far this year, which could provide added support to tanker rates. In its report, McQuilling noted that in an effort to curb the tide from previous years' orderbooks, ship owners and companies have used a variety of measures in an effort to delay deliveries. Tactics include outright cancelations, foregoing options, taking delivery of a different vessel class or inspection delays. Due to the highly confidential nature of these discussions, developments between owners and ship yards are difficult to gauge.
“However, a measurable outcome from these discussions has been a discrepancy between expected and actual deliveries, or slippage. Historically, this figure hovered around 5%, yet since 2009 it has been much higher. Highlighting how these developments have helped reduce current tanker supply, our delivery estimates already consider delays on the basis of owners, ship yards or both facing financial difficulties. Our process of forecasting slippage considers many factors. Prior to making the adjustments to represent delays and cancellations we recorded 348 vessels 27,500 dwt and above that were scheduled to be delivered this year. This accounts for vessels that have a hull and an IMO number but omits deals listed as "reported". We then determine what vessels will be delivered as IMO 1 or 2, as they are not included in our inventory count, before making adjustments for delays and cancelations. At the end of Q1, slippage was already above total 2011 figures but this could quickly change as delayed orders will inevitably enter the market. There were 43 confirmed orders for new tankers in the first quarter of 2012, the majority of which are not scheduled to be delivered until after 2013. Of these vessels, 33 are between 28,000 dwt and 52,000 dwt and cast a gloomy shadow on the horizon of MR tanker supply” said Mcquilling.
Nikos Roussanoglou, Hellenic Shipping News Worldwide