Another tough year is on the horizon for tanker owners as the market continues to struggle under the pressure of overcapacity, says shipping consultant Drewry. The company noted that global oil consumption only managed a timid growth in the fourth quarter of 2012, with global crude oil loadings increasing by 0.6 per cent. OECD consumption shrank by 1.0 per cent, despite US Gulf Coast refiners increasing imports of heavy crude from the Middle East Gulf by 2 per cent. This contrasted with a 2.7 per cent increase in non-OECD countries as weak US demand for light crude forced West African producers to export to eastern markets.

Tonnage demand in the tanker market increased 0.6 per cent to 325 million dwt in the fourth quarter, and Drewry expects this to increase by 2.6 per cent to 330 million dwt in 2013. However, 26.4 million dwt of fresh tonnage is due for delivery in 2013. The last quarter of 2012 saw the tanker fleet expand by 4.3 million dwt to reach over 412 million dwt.

Capacity expansion in the dirty tanker segment was faster than for clean tankers, at 3.4 per cent compared with 2.5 per cent. In both categories, almost all the additions took place in larger vessels segments such as VLCC, Suezmax and LR2. The fleet of smaller vessels shrank, suggesting that owners are being attracted to the economies of scale offered by larger vessels. Deliveries continue to outpace strong demolitions, which reached their second highest level for five years with over 11 million dwt demolished.

“A persistent weakness in freight rates, in conjunction with high bunker prices, limited availability of credit and very low earnings has discouraged owners from placing new orders, despite falling prices. With earnings at unattractive levels, owners remained reluctant to take deliveries as delivery slippage reached 38 per cent in 2012,” said Drewry.  “Even the strategy of yards to attract owners by offering vessel designs with improved efficiency in the scenario of rising fuel cost does not seem to be working at this stage.”

Meanwhile, Drewry’s latest Dry Bulk Forecaster report suggests that cash-strapped shipowners will scrap younger and younger ships this year as the dry bulk market wallows in the doldrums. A ship as young as 15 years has already been sold for scrap in recent months, and the average scrapping age of Chinese-built Capesizes was 21 years in 2012.

Drewry does not expect any improvement in the freight market in 2013 and foresees a growing number of dry bulk shipping companies getting into financial difficulty. Demolitions in 2013 are expected to be above 36 million dwt, more than what was seen in 2012, and the average scrapping age will fall even further as middle-aged vessels struggle to find employment.

The average scrapping age of the smallest segment, Handysize, will fall below the 30-year mark in 2013, having dropped from 32.4 to 30.1 years last year.