Whether a large newbuild order book would weigh on tanker rates could depend on the pace of shadow-fleet scrapping and evolving demand situations during the Hormuz shipping crisis, some ship operators said.

Industry association BIMCO estimates the crude tanker order book size at nearly 25% of the existing fleet, the highest level since the 2008 financial crisis, while the product tanker order book sits at nearly 20%.

But Antonis Kanellakis, executive director of Pantheon Tankers, said the order book is “manageable at the moment,” especially when the sanctioned fleet is taken into account.

“At some point, it will have to phase out,” Kanellakis said during a Capital Link forum’s panel discussion on the opening day of the Posidonia shipping conference. “The sanctioned ships are very old ships, probably not very well maintained.”

“If you think of that, the order book on crude and products is not excessive.”

The number of oil and LPG tankers sanctioned by Western authorities for Russian, Iranian or Venezuelan trades reached 1,189 as of the end of April, making up 13% of the global fleet, according to S&P Global Commodities at Sea(opens in a new tab).

Offering a different view, Centrofin Management CEO Yiannis Procopiou said the order book is the highest in over 17 years and there are “many, many ships” due to be delivered later this decade.

“I really feel that there will be softening in the rates,” Procopiou said, adding that when sanctioned ships began to be sent to scrapyards the process would be slow.

“It won’t happen from one day to the next. So I think that this interval will create a depreciated market.”

Having jumped from $170,409/day Feb. 27 to $401,138/d March 4, Platts Global Dirty Tanker Index for scrubber-fitted, eco-ships eased to $221,657/d May 29. Platts is part of S&P Global Energy.

Procopiou’s comments came as Brussels signaled it would be willing to allow scrap deals for sanctioned ships to go ahead, but the UK and US have yet to have such blanket sanctions relaxation.

In a separate Capital Link panel, senior executives of Bahri and Capital Maritime & Trading — some of the world’s largest tanker owners — said Western authorities should find legal routes to promote the sanctioned fleet’s recycling.

“It is unsafe, it has zero transparency, and we could have an environmental disaster any time,” Bahri CEO Ahmed Ali Alsubaey said. “We need to incentivize these people to scrap.”

‘Demand destruction’
Capital Tankers CEO Jerry Kalogiratos said ship oversupply issues might not be too serious as many newbuild orders were placed at less-established yards that could delay their deliveries.

“I think the supply is manageable,” Kalogiratos said. “The big question is, will demand be there? The biggest risk is demand destruction.”

Iran has taken control of the Strait of Hormuz, which handles 20% of global oil trades in normal times — since its war with Israel and the US broke out Feb. 28.

The development has limited ship crossings via the choke point to 90% below the prewar level, leading to tanker rate spikes due to longer shipping distances as Asian importers seek Atlantic barrels. But many industry participants and analysts have voiced concerns that a prolonged disruption would lead to higher oil prices and less demand.

In its May report, the International Energy Agency forecast global oil demand to fall by 420,000 b/d to 104 million b/d over the full year, a decline more than five times the scale of its previous prediction.

Pankaj Khanna, CEO of Heidmar Maritime Holdings, said market participants did not pay enough attention to demand issues as the general view is that Hormuz would open up soon.

He pointed to the potential demand loss due to the recent policy announcement by Indonesia, which has planned to convert 120 million gasoline-powered motorcycles to e-bikes due to a looming fuel shortage.

Indonesia’s oil demand will likely stall at 1.6 million-1.7 million b/d if the policy is to go ahead rather than grow to 2 million b/d by 2030, according to Khanna.

“If the states don’t open up and this keeps going on and on the way it is right now, we will see real demand disruption, which is not good for the market,” he added.

Source: Platts