H.P. Drewry Reports On The Market For Medium-Sized (70-175,000 DWT) Tankers

While the comparatively recent phenomena of the VLCC and ULCC on the one hand and the sophisticated products carrier and other small tankers on the other have been widely discussed, the medium-sized tanker (70-175,000 dwt) has been largely ignored.

H.P. Drewry (Shipping Consultants) Limited aims to fill this gap in tanker market information with its latest study "The Market for Medium-Sized Tankers (70-175,000 dwt)." The study contains a detailed examination of the medium-sized tanker fleet as a whole and analyzes it in terms of fleet characteristics, current pattern of employment and future supply and demand of medium-sized tanker tonnage.

At the end of 1975 there were 657 medium-sized tankers, totaling 66 million dwt, which represented 23 percent of world tanker tonnage, while the order book comprised 251 vessels amounting to 30 million dwt, or 28 percent of the total tanker order book.

The corresponding figures for small tankers (under 70,000 dwt) and VLCCs (over 175,000 dwt) were 70 and 150 million dwt, or 25 percent and 52 percent of world tonnage, with some 8 and 71 million dwt on order. Two hundred and fifty-one medium-sized combined carriers totaling 31 million dwt represented 72 percent of the total combined carrier fleet, and there was another 6 million dwt on order representing 80 percent of the order book. By mid-1976, through cancellations and deliveries, the structure of the tanker order book had changed considerably, with that for medium- sized tonnage standing at 173 vessels totaling 21 million dwt, and that for small and VLCC tonnage at 7 and 42 million dwt.

Only one combined carrier order had been canceled. The 1980 ratio of world tanker tonnage, based solely on the mid-1976 fleet and order book (without scrappings, etc.), would be 20:25:55 for small, medium and large tonnage or 73, 91 and 205 million dwt, the effect of new deliveries on the relative proportions being minimal.

The first medium-sized tankers were sent to breakers' yards in mid-1975, and by June 1976, nineteen vessels totaling 1.7 million dwt had reportedly been sold for scrap. Characteristically, these were steam-powered, oil companyowned ships, built in the early 1960s and mainly in the 80,000, 90,000 and 100,000-dwt ranges.

At end-1975, 98 percent of the fleet was less than 16 years old, but only 42 percent was less than six years old, compared with 78 percent of the VLCC fleet.

The largest size group within the medium-size range in 1975 was the 80,000-tonners, a substantial number of which were the "Sanko Deal" ships; 70,000- tonners amounted to 11 million dwt (16 percent of the total), 90,000-tonners to just over 9 million dwt (14 percent of the total), and 130,000-tonners to just under 9 million dwt (13 percent of the total). In 1980, with the addition of the end-1975 order book and not allowing for scrappings, etc., the largest size category will still be 80,000-tonners, but 70,000-tonners will slip in relative significance due to the current complete absence of orders for them.

The medium-sized tanker fleet has a larger proportion of independently- owned tonnage than either the small or VLCC fleets, 73 percent being independently owned at mid-1976, compared with 57 percent for small and 65 percent for large tankers. Of the independent owners of medium- sized tonnage, Greek, Japanese and Norwegian owners are predominant, with NYK, which has about 2 million dwt, being the largest. Exxon and Shell have about 2 and 1.5 million dwt, and the Governments of India, Chile, Brazil, Poland and Portugal each have substantial volumes of medium- sized tonnage. Changes to the ownership structure through new deliveries alone will be small, but there has been a noticeable trend in second-hand sales of medium-sized tankers from independents to government-sponsored national fleets.

A detailed investigation of the current employment of mediumsized tankers is made in Section 2 of the study, including a separate analysis of the U.S.-flag mediumsized tanker fleet. This shows that three loading areas account for 80 percent of medium-sized tanker loads, with 57 percent made in the Middle East (Gulf), 13 percent in North Africa, and 10 percent in West Africa. South Europe was the most important discharge region, with 28 percent of all medium-sized tanker discharges, followed by Japan, with 20 percent, and North Europe and the East and Gulf Coasts of the U.S., each with 15 percent. The pattern of trade for U.S.-flag medium-sized tankers, the figures for which are excluded from those given above, is radically different, for 75 percent of their movements are made between U.S. ports, such trades being restricted by the Jones Act to U.S.-flag vessels. In 1975, medium-sized tankers were responsible for transporting about 21 percent of seaborne world oil movements. Their major routes, in terms of employment, tend to be the long-haul VLCC/ULCC routes; on AG PG to South Europe, for example, they were only responsible for carrying 7 percent of all oil moved, but from AG7PG to Japan were responsible for 30 percent of oil moved. Mediumsized tankers carried virtually all oil moved from the East Mediterranean to South Europe, mainly because the loading ports could not accommodate fully laden VLCCs.

A detailed appraisal of ports used by medium-sized tankers by type of port and frequency of calls in principal load and discharge areas is made. Analysis of the calls reveals that 14 ports accounted for 75 percent of all loading calls in 1975 (Ras Tanura being the most important). There were several ports of almost equal importance in medium-sized tanker discharge schedules for which a high incidence of multi-porting was recorded, especially at ports in north and south Europe and Japan. Most loading ports were capable of handling VLCCs but substantially fewer discharge ports, the U.S. East and Gulf Coasts being the most notable area where lightening was necessary.

The section on employment concludes with a discussion of the relationship between actual employment and estimated demand for medium-sized tonnage in 1975 by discharge area, and estimates real demand to have been 47.5 million dwt, equivalent to only 77 percent of the available tanker fleet. Including combined carrier medium-sized tonnage operating in oil trades, the total real demand was about 60 million dwt, resulting in an overall surplus of about 30 million dwt.

The final section of the study contains a discussion and evaluation of future demand and supply for medium-sized tonnage.

Demand for all medium-sized tonnage, based on estimated development of port and refinery capacities, is forecast to be between 84 and 94 million dwt, while supply ranges from 83 to 96 million dwt, depending on new deliveries, different rates of scrapping, and allowing for only 25 percent of combined carrier tonnage in oil. The enlargement of the Suez Canal is not likely to greatly improve the prospects for medium-sized tankers, but this will depend on the Suez Canal tariff. Segregated ballast regulations, if introduced, would cause a reduction in cargo-carrying capacity, thereby reducing mediumsized tanker and combined carrier availability to about 80 million dwt in 1980. The prospects for medium-sized tankers in 1980, considering the greater volume of combined carriers likely to be available, but not allowing for the imposition of segregated ballast regulations, is likely to be one of surplus of supply of between 10 percent and 20 percent, compared with 30 percent in 1975.

"The Market for Medium-Sized Tankers (70-175,000 dwt)," No.

47 in a series of reports on various aspects of shipping prepared by the Research Division of H.P.

Drewry (Shipping Consultants) Limited, Palladium House, 1-4 Argyll Street, London W1V IAD, England, is available at a single copy rate of $75 (all overseas orders), or on a subscription basis $250 (all overseas orders), for the series 41-50.