Page 6: of Maritime Reporter Magazine (April 1995)

Outlook For Product Tanker Construction by James R. McCaul, president

IMA Associates Inc.

Construction of product tankers represents one of the best market opportunities for ship- builders and suppliers. IMA's analysis indicates that the combination of aging ships and addi- tional tonnage requirements will produce an interesting demand situation in this business sector. IMA believes this market will provide a growing base of repetitive orders, allowing yards to invest in standard designs and benefit from the economies of learning. It is not coincidental that a number of U.S. builders have targeted this sector for penetration, and have clearly suc- ceeded in establishing a foothold over the past year.

There are approximately 2,100 product tank- ers of all sizes currently in service. The inven- tory breaks down into 1,200 small tankers under 20,000 dwt, 690 tankers between 20,000 and 50,000 dwt, and 115 tankers between 50,000 and 80,000 dwt, and about 85 large product tankers

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Circle 314 on Reader Service Card more than 80,000 dwt. IMA's recent study exam- ined the composition of this inventory to identify the geographical location of ownership and con- trol. The study's objective was to identify the points of buying power for product tankers. Spe- cifically, the study identified the company con- sidered responsible for day-to-day operation of each ship currently in service. An interesting finding is the prominence (i.e. buying power) of companies in North and South America. As shown in chart 1, owners in this region control 23 percent of product tankers between 20,000 and 50,000 dwt, 27 percent between 50,000 and 80,000 dwt, and 31 percent over 80,000 dwt. These owners include Exxon, Chevron, Pemex, Teekay

Shipping, OMI, OSG, and others.

Builders of product tankers

Asian shipbuilders have accounted for the bulk of product tankers built over the past five years. Two-thirds of product tankers in the 20,000 to 50,000 dwt range and almost 80 per- cent of product tankers above 50,000 dwt deliv- ered since 1990 were built by Asian builders.

Among the Asian shipyards prominent in prod- uct tanker construction have been Hyundai,

Halla, Omonichi, Imabari and Dalian.

Asian builders continue to be prominent in construction of product tankers. There are ap- proximately 100 product tankers above 20,000 dwt currently on order worldwide, about one- third of which are booked in Asian shipyards.

However, over the past year, U.S. shipyards have suddenly appeared among the top five builders of product tankers. Counting only firm orders, U.S. yards account for seven percent of the product tanker deadweight currently on or- der. The percentage would be 12 percent if option orders are taken into account. This pen- etration is significant, particularly given the fact that U.S. shipyards have been absent from this

Chart 1

Geographical Breakdown of

Product Tanker Control 20,000- 50,000- More than 50,000 dwt 80,000 dwt 80,000 dwt

Location of No. of %of No. of % of No. of %of

Relevant Owner Ships total Ships total Ships total

Asia 138 20 20 18 17 20

N. Europe 142 21 30 27 20 24

S. Europe 187 27 26 23 14 17

N./S. America 156 23 30 27 26 31

Middle East 33 5 4 4 0 0

Rest of World 9 1 0 0 0 0

Location Unknown 22 3 3 3 6 7 687 100% 113 100% 83 100%

Source: IMA Associates, Shipbuilding Industry Outlook, April 1995

Chart 2

Product Tankers More Than 20,000 DWT On Order

Country of Build # of Ships Total dwt (in 000's)

Korea 21 1,241

Ukraine 16 723

Croatia 13 483

Romania 12 474

U.S. 8 328

Spain 7 308

Russia 8 289

Japan 4 270

China 6 249

Poland 3 119

Brazil 2 72

Germany 1 32

Total 101 4,588

Source: IMA Associates, Shipbuilding Industry Outlook, April 1995 8 Maritime Reporter/Engineering News