Nostalgia’s failings and the tanker market

From Trump to Brexit, North Korea to the global tanker market, the world can seem a more hostile place than ever before. It was comforting then to listen to Dr Martin Stopford address delegates of the Tanker forum at this year’s Asia Logistics and Maritime Conference in Hong Kong (November 23-24).

Dr Stopford, non-executive president of Clarksons Research Services and world-renowned shipping seer, can always be relied upon to bring a larger, deeper and more historically rich analysis to his subject than your average pundit. This session was no exception.

Digging into the historical sediment of the tanker market over the past 40 years, Dr Stopford reminded some and enlightened others for the first time to the fact that while conditions are not perfect one didn’t have to look far back to see that conditions could be far worse.

Looking first at earnings over the past 12 months as a percentage of earnings over the last 7 years tankers are currently 20% below trend compared to bulkers that are trading 10% below trend.

“Tankers,” he insisted “have been pretty good in the last five years or so compared to the 1980s and the last big recession.” This was an understatement.

The 1980s was a thoroughly miserable decade characterised by soaring interest rates when rates for tankers equaled nothing more than operating costs for long periods of time.

It was the sort of problem that was not experienced when the financial crisis hit in 2008, Dr Stopford recalled. He provided a stark illustration of just how catastrophic the impact of the 80s recession on the tanker market was compared to today with the following startling statistics.

In the 1980s there were nearly 70m tonnes of tankers laid up and a further 60m tonnes were soaked up by slow steaming and waiting. Compare this to 1.4m tonnes of tankers laid up and a small amount of tonnage soaked by slow steaming in the current market and clearly today tanker owners are having a picnic compared to their ancestors. Even with the threat of the 45m tonnes of tankers entering the market this year, clearly there is nothing to encourage nostalgia for the past. But for one factor…Productivity.

Tanker productivity has free-fallen over the last 30 years to the point that last year it was just 24,000 tonne miles per dwt.

“Basically in the last 20 years the oil companies have dropped the ball on logistics,” said Dr Stopford.

“Back in 1973 the oil companies ran a very tight ship and every barrel of oil was delivered as effectively and efficiently as possible. Today we have surplus capacity we have waiting and slow steaming. We are just not doing the logistics.

“A lot of the oil is coming into Asia and a lot of it is products. I think the tanker industry has a big challenge here to get back to grips with managing the vessels. Perhaps stop speculating so much on new ships, focus much more on getting tighter logistics instead,” he chided.

 

 

 

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