Tanker supply until 2015OECD working party on shipbuilding

Paris by

Erik.Ranheim@INTERTANKO.comManager Research and Projects

Paris 4-5 December 2008

Tanker contracting bn $/ m dwt

bn $

Source. Clarkson Shipyard Monitor

m dwt

Av 7.3 17.5

19.9 38.9 $ 38.4 61.1 dwt

0

10

20

30

40

50

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Se

p-0

8

0

10

20

30

40

50

60

70

80

90

100

Handy

Panamax

Aframaxes

Suezmaxes

VLCCs

dwt

Tanker fleet, orderbook, SH tankers

58.7 169.8 377.7 m dwt Average age 10.9 years 89% <20 years old 75% <15 years old 61% <10 years old

m dwt

0

60

120

180

240

300

360

SH - 16% Orders - 48% Fleet - 100%

VLCC - 103

Suezmax - 39

Aframax - 99

Panamax - 77

25-60,000 - 287

19%

29%

54%

38%

54%

Tanker deliveries, removals, max phase-out 25,000 – 59,999 dwt

m dwtm dwt

Assumed balanced market end 2007

Fleet 1,614 66 m dwtOrderb. 435 20 “ 30%Not DH 287 11 ” 19%

-6

-4

-2

0

2

4

6

8

10

12

14

-02 03 04 05 06 07 08 09 10 11 12 13 14 15

Max phase out

Demolition

Delveries

Surplus 0%increase tradeSurplus 2.5%increase tradeSurplus 4%increase trade

year

Tonnage overhang

Tanker deliveries, removals, max phase-out Panamaxes 60,000 – 79,000 dwt

m dwtm dwt

Assumed balanced market end 2007

-3

-2

-1

0

1

2

3

4

5

6

7

-02 03 04 05 06 07 08 09 10 11 12 13 14 15

Max phase out

Demolition

Delveries

Surplus tonnagezero increasedemand

Surplus tonnage2.5% increasedemand

Surplus tonnage4% increasedemand

Fleet 377 25 m dwtOrderb. 132 10 “ 38%Not DH 72 5 ” 19%

Tanker deliveries, removals, max phase-outAframaxes 80,000 – 119,999 dwt

m dwtm dwt

Assumed balanced market end 2007

-5

-3-1

1

3

57

9

1113

15

17

1921

23

25

-02 03 04 05 06 07 08 09 10 11 12 13 14 15

Max phase out

Deletions

Delveries

Surplus 0%increaser indemandSurplus 2.5%increaser indemandSurplus 4%increaser indemand

year

Tonnage overhang

Fleet 762 79 m dwtOrderb. 271 30 “ 38%Not DH 99 9 ” 12%

Tanker deliveries, removals, max phase-outSuezmaxes 120,000 – 199,999 dwt

m dwtm dwt

Assumed balanced market end 2007

Fleet 359 55 m dwtOrderb. 186 29 “ 53%Not DH 38 6 ” 10%

-4

0

4

8

12

16

20

24

28

-02 03 04 05 06 07 08 09 10 11 12 13 14 15

Max phase out

Deletions

Delveries

Surplus zerodemandincreaseSurplus 2.5%demandincreaseSurplus 4%demandincrease

year

Tanker deliveries, removals, max phase-outVLCCs 200,000 dwt +

m dwtm dwt

Assumed balanced market end 2007

Fleet 503 149 m dwtOrderb 261 81 “ 54%Not DH 103 28 ” 19%

-20

-12

-4

4

12

20

28

36

44

52

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Max phase out

Actual Deletions

Delveries

Surplus zeroincrease

Surplus 2.5%increase

Surplus 4%increase

year

Assumed removals ahead of phase out 2008

Tanker deliveries, removals, max phase-outAll tankers > 25,000 dwt

m dwtm dwt

Assumed balanced market end 2007

-35

-15

5

25

45

65

85

105

125

-02 03 04 05 06 07 08 09 10 11 12 13 14 15

Max phase out

Deletions

Delveries

Surplus zerotrade growthSurplus 2.5%trade growthSurplus 4%trade growth

year

Removals in addition to phase out (conversions)

Investment in new tankers

• Some $ 327 billion invested since 2000 with the result that 96% of tanker fleet double hulled in 2010*

6

22

5159

67 68 73 78 8491 96

94

78

4941

33 32 27 22 169 4

0

20

40

60

80

100

1991

1997

End

02

End

03

End

04

End

05

End

06

End

07

End

08

End

09

End

10

SH/DB/DS

DH

% dwt share:

*Assuming only DB/DS tankers continue to trade beyond 2010, some SH tanker will most probably continue until the age of 25 years old

Tanker fleet development

Tanker fleet increase 2003-2010: 61%

290

328

366

404

442

480

518

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

3,300

3,800

4,300

4,800

5,300

5,800

dwt Number

m dwt number

Need for new contractsassuming 4% increase in demand

m dwtm dwt

Assumptions:All SH out by 2010 (questionable)Balanced market end 2007 (some slack existed)Current orderbook 24 years life time DH tankers as from 2016

0

6

12

18

24

30

2008 2009 2010 2011 2012 2013 2014 2015

VLCC

Suezmax

Aframax

Panamax

25 - 59,999 dwt

Average ordering 2003-2008

Conclusion

Conclusion

• A tanker surplus is building up unless demand is strong

• Crises probably means abating demand

• No need for additional tanker orders over the next couple of years

Appendix

The tanker market facing

• Financial and economic turmoil

• Abating demand

• Demand firstly powered by China

• Probably cancellation of contracts,

• Increasing fleet 2009-2011

• Scrapping up, as

• Conversions to dry bulk halted

Single-hull phase-out regulation

U.S. OPA 90DH for new tankers SH phase-out by 2010(by in 2015 LOOP, lightering areas)

IMO – MARPOLDH for new tankersAccelerated phase out as from 2005SH phase-out by 25 years or latest 2010, or by 2015 subject to administrations (flag/port)

IMO – MARPOL 13H Bans HGO as cargo in SH tankers

SH trading beyond 2010?

– Australia No– China No– EU No– Mexico No– Romania No– S Korea No– Philippines No– UAE No

no official note to IMO on

– Bahamas Yes– Barbados Yes– Liberia Yes– Marshall Isl. Yes– Panama Flag Yes– Japan Yes– Singapore Yes– India Yes– Hong Kong * Yes

*20 years

Flag/Port States positions MARPOL 20 Trading until the age of 25 years

– United States N/A OPA90

Global Financial Crisis Tanker Fleet Removals

Source: INTERTANKOSource: INTERTANKO

m dwtm dwt

ConversionsConversions 2005 2006 2007 2008 2009

Small 2Small 2 0 0 13 13 23 23Aframax 0Aframax 0 4 4 19 19 14 14Suezmax 0Suezmax 0 6 6 13 13 9 9VLCC 2VLCC 2 9 9 15 15 30 30

0

6

12

18

24

3019

6919

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

Conversions

Scrapping

?

?