Short comment - World tanker fleet www.isl.org

Fig. 1: World tanker fleet – annual tonnage changes 1996- 2007 1 WORLD TANKER FLEET 2006/2007 (dwt- per cent) 12.0 10.1 1.1 Tanker fleet development by type 10.0 8.0 st 6.1 Looking at the period of January 1 , 2003-2007, the total 5.2 tanker fleet, in terms of dwt, increased on average by 6.0 3.2 3.2 4.0 2.5 2.4 5.4 per cent per year. At the beginning of 2007, the tanker 2.3 1.9 1.8 1.4 1.7 1.3 1.5 1.2 2.0 -0.9 1.0 fleet for ships of 300 gt and over comprised 10,824 0.0 tankers totalling 411.6 mill dwt. In terms of dwt the total 0.0 -0.6 tanker fleet increased by 6.1 per cent over 2006 whereby -2.0 the net gain – i.e. the tonnage balance between tonnage 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 additions (newbuildings) and tanker demolitions - stood at 24.5 mill dwt. The net increase for the various tanker market segments in 2006 comprised Fig. 2: World tanker fleet – additions and reductions 1994 – 2006 (mill dwt) ƒ 21.6 mill dwt for oil tankers ƒ 0.3 mill dwt for chemical tankers ƒ 2.6 mill dwt for liquid gas tankers Compared with figures for 2005, the total broken-up tanker tonnage decreased by 45.3 per cent (7.2 mill dwt in 2005). Thus, the oil tanker demolitions in 2006 were far below the level foreseen for phasing-out. As of January 1st, 2007, the amount of single hull tankers, which should be phased out until 2015, stood at approx. 103 mill dwt (incl. 10 mill dwt which has to be withdrawn from the market until the end of 2006). Fig. 3: World tanker fleet – age structure by major types as of The “IMO double hull legislation” is partly bypassed by January 1st, 2007 (dwt per cent-share) reconstruction, regionally limited utilisation in states up to 1986 1987-1996 1997-2006 without ratification of the IMO-regulations, or by 60 utilisation outside oil trading and rebuilding (e.g. heavy lift 50 ships). In the light of the excellent spot market returns in 40 recent years much more tankers than expected were fitted with double hulls. This explains the very low scrapping 30 rates of tankers during the last three years. %-share dwt 20

Additions (newbuildings) to the total tanker fleet during 10 2006 reached 28.4 mill dwt – a high level but about 10 per cent less than in 2005. During 2006 439 oil tankers with 0 Oil tankers Chemical tankers Liquid gastankers approx 25.1 mill dwt, 56 chemical tankers with 0.7 mill dwt and 68 liquid gas tankers with 2.7 mill dwt were entering the world tanker fleet.

1.2 Age profile of the world tanker fleet Sources The high amount of newbuildings delivered during the If not otherwise mentioned, the source for tables and figures concerning the world merchant fleet, special ship type features last five years changed the age profile of the tanker fleet - and order book information is “ISL based on LR/Fairplay”, and this change could even be stronger. But phasing-out please quote accordingly. In general merchant fleet data refer of single hull tanker tonnage is, as already mentioned, not to ships of 300 gt and over. yet fully realised or was surpassed. As of January 1st, 2007, Explanatory notes the total tanker fleet still comprised 1,695 single hull ISL aggregates the tanker fleet figures analytically as follows: tankers with 102.9 mill dwt. These tankers, approx. 27 per Oil tankers: including - crude oil tankers, - crude oil products cent in terms of tonnage of the total oil tanker fleet, must tankers (crude tankers below 30,000 dwt), - products tankers, by phased-out until end of 2015. At the beginning of - oil/chemical tankers, - other tankers Chemical tankers including - chemical tankers and other 2007, these tankers had an average age of 22.4 years. chemical tankers Liquid gas tankers including LNG and LPG and other liquid gas 1.3 Size dimensions of the world tanker fleet carriers

At the beginning of 2006, 6,075 tankers equal to 56.1 per Additions/reductions: cent of all tankers, representing in terms of dwt 4.6 per Additions (newbuildings) entering the fleet refer to the fleet data of the following year. Reductions (broken-up) tonnage cent of the total world tanker tonnage, were attributable refer to the fleet data of the respective year. to size classes below 10,000 dwt.

SSMR March 2007 1 Short comment - World tanker fleet www.isl.org

Key figures of the world tanker fleet according to type Fig. 4: World tanker tonnage according to country of domicile for and/or relevant size aggregates for specific employment OECD and non-OECD countries as of January 1st, 2007 segments (tankers above 10,000 dwt) can be summarized (dwt-%) as follows: 100.0 OECD Non-OECD ƒ Oil tankers 77.7 76.5 74.1 80.0 The oil tanker fleet shows a different size segmentation 65.0 64.5 for crude oil, products and oil/chemical tankers. The 60.0 deadweight tonnage of the crude oil tanker fleet is to 35.0 35.5 40.0 25.9 more than 95 per cent (dwt) attributable to only three size dwt %-share 22.3 23.5 classes, namely Aframax, Suezmax and VLCC, with a clear 20.0 dominance of the VLCCs. 0.0 The size distribution of products tankers and oil/chemical Crude oil Product Oil/chemical Chemical Liquid gas tankers concentrates on different size classes. As of tankers tankers tankers tankers tankers January 1st, 2007, products tankers were largely Ships of 1,000 gt and over; Excluding tonnage of ships of which the parent company is attributable to sizes from 10,000-120,000 dwt, whereas unknown. oil/chemical tankers ranged in handysize/handymax Fig. 5: World oil demand by region 2006 (% shares of average classes. million barrel/day) Chemical tankers and liquid gas tankers Middle East Africa By number chemical tankers and liquid tankers Asia 7% 3% concentrate on dwt-sizes below 5,000 dwt. At the 29% beginning of 2007, chemical tankers were, in terms of tonnage, largely attributable to handysize/handymax sizes (70.4 per cent), whereas liquid gas tankers tended to larger sizes, namely the size class 60-79,999 dwt (45.9 per cent). North st America The order book as of January 1 , 2007, confirmed this 31% trend - there is a shift toward larger liquid gas tanker units. Europe C. & S. 62 gas tankers with approx. 6.0 mill dwt ranged in sizes 24% America 6% above 80,000 dwt, of which 10 gas tankers in sizes above BP, Statistical review of world energy 120,000 dwt.

Fig. 6: Seaborne crude oil trade from Middle East/Gulf by 1.4 Ownership patterns of the world tanker fleet direction in 2005 ƒ World tanker fleet by flag 400 At the beginning of 2007, 212.9 mill dwt equal to 51.8 per 350 cent of the total tanker tonnage were registered for the 300 top ten open registry flags. Open registry flags are 250 especially prominent in the oil tanker sector but 200 meanwhile they have also the highest tonnage shares for

mill tonnes mill 150 chemical and liquid gas tankers. 100 The registered world tanker tonnage is largely attributable 50 to Panama. At the beginning of 2007, the tanker tonnage 0 registered for Panama had a level of 66.9 mill dwt North Europe Africa China Japan Other Others compared to 62.5 mill dwt in 2006, which is equal to 16.3 America Asia ISL, based on BP, Statistical review of world energy per cent of the total tanker fleet. Liberia is the second ranking flag for tankers. As of January 1st, 2007, 711 tankers with a capacity of 55.7 mill dwt sailed under the Explanatory note: Liberian flag. This was a tonnage increase of 6.4 per cent Gas tanker capacity is in addition to dwt/gt measured in cu.m. These figures or dwt/gt/cu.m. coefficients are based on compared with last year. various other information sources, namely Clarkson Ship OECD flags’ registered tanker tonnage stood at 101.9 mill Register. The Gas Carrier Register 2007 Statistical details “ World Tanker Fleet” dwt which represented a tonnage increase of 5.3 mill dwt ƒ Key figures p. 17 compared with 2006. ƒ by division of age and type p. 27, 30, 33 ƒ by size class and ship type p. 27, 30, 33 ƒ by summer draught, length and 2 TANKER MARKET FUNDAMENTALS 2006/2OO7 broad and ship type p. 27, 30, 33 Explanatory note - Tanker size classes Handysize: 10000 - 39,999 2.1 Oil and gas – production and consumption Handymax: 40000 - 59,999 patterns Panamax: 60000 - 79,999 Aframax: 80000 - 119,999 The world oil production is largely concentrated on OPEC Suezmax: 120000 - 199,999 producers (approx. 42 per cent) which in 2005 accounted VLCC: 200000 - 319,999 ULCC: >= 320,000 for nearly all the increases in global oil production. Saudi

2 SSMR March 2007 Short comment - World tanker fleet www.isl.org

Arabia increased its production in 2005 to 526 mill tonnes. Fig. 7: Liquid bulk imports of selected ports by countries (Index 1991= 100) 2.2 Seaborne oil/oil products trade and port traffic 220 The crude oil seaborne trade analysis for the year 2005 Korea, Rep. of Japan 200 published by Fearnleys gives an interesting overview on the EU US market structures and development of crude oil shipments 180 for the last ten years. The seaborne trade of liquid bulks, in 160 this case especially oil and oil products, increased by 4.2 per 140 cent in 2005 to 2.3 billion tonnes. The strength of seaborne liquid bulk trade growth in 2005 was determined by the 120 increasing oil imports of China and other non-OECD Asian 100 economies. 80 World international seaborne trade in crude oil reached a 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 ISL Port Data Base 2007 level of 1.8 billion tonnes in 2005. Compared to the revised figures for 2004, it increased by 1.7 per cent. Fig. 8: World tanker fleet - share of the ordered tonnage (dwt) on The developments in seaborne oil trades are also reflected the existing fleet as of January 1st, 1993-2007 in the liquid bulk traffic of the leading world ports. 70.0 Oil tankers Results based on the ISL Port Data Base can be 60.0 Chemical tankers summarised for 2005 as follows: 50.0 Liquid gas tankers North European and South European ports showed a 40.0 similar development concerning their liquid bulk traffic. 30.0 20.0

In comparison to 2004, these two patterns equalise slightly dwt %-share of fleet but insignificantly in 2005. During 2005, more than half 10.0 (55 per cent) of the liquid bulk imports handled at South 0.0 European ports came from other European countries, 37 1993 1995 1997 1999 2001 2003 2005 2007 per cent were imported from Africa and only 5 per cent arrived directly from Asia. Fig. 9: Oil tanker fleet - quarterly development of new orders and broken-up tonnage 2001 – 2006 (in dwt) 2.3 Tanker rates and prices Tanker rates on benchmark trades (compare table 11) showed massive fluctuations. The year 2006 started with a strong increase of tanker rates. Rates for January and February 2006 remained above the 2005 averages, but end year rates in 2006 showed a remarkable decrease. Throughout the first three months in 2007, a time when the market normally is booming, the benchmark trades showed no firm trend yet. But it seems that a more weakening tendency is predominant in the market so far. Moreover as the rapid tanker fleet growth might weigh heavily on the market in a “downward cycle”. Fearnleys Fig. 10: Chemical tanker fleet - quarterly development of new orders commented in the Review 2006 that “it is important to and broken-up tonnage 2001 – 2006 (in dwt) view 2006 as part of the downward cycle in the wake of the extremely high market in 2004”. Within the “Review 2006” the following tanker rate developments were highlighted for selected benchmark trades to indicate the market changes 2005/2006:

Time charter Spot rates Earnings rates (1000 (World scale) % - (US$/day) % - US$/day) % - 2005 2006change 2005 2006change 2005 2006 change VLCC 105 102 -2.9 71400 76300 6.9 59500 57700 -3.0 Suezmax 161 149 -7.5 61000 59200 -3.0 41300 43200 4.6 Aframax 190 167 -12.1 34900 29500 -15.5 33100 32900 -0.6

Spot rate: VLCC - MEG/Japan; Suezmax - W. Africa/US Atl.; Aframax - N. Africa - Europe MED. Freight Earnings: VLCC - Ras Tanura/Yokohama; Suezmax - Bonny/Philadel- phia; Aframax - Sidi Kerir/Lavera Time charter rates: VLCC - 280,000 dwt modern; Suezmax - 150,000 dwt modern; Aframax - 95,000 dwt modern

SSMR March 2007 3 Short comment - World tanker fleet www.isl.org

3 FUTURE TANKER TONNAGE SUPPLY Fig. 11: Liquid gas tanker fleet - quarterly development of new orders and broken-up tonnage 2001 – 2006 (in dwt) The volatile tanker market makes any prediction difficult. Supply/demand imbalances might result from a more moderate demand in a period when high tonnage volumes will be delivered to the tanker fleet. Due to the strong demand for tanker tonnage during the last three years only few older tankers were removed from the market And the order book for tanker tonnage indicates that there will be more new tonnage in the short run. About 103 mill dwt of single hull tankers should be phased out until 2015. However, phase-out is partly bypassed by reconstruction, regionally limited utilisation in states without ratification of the IMO-regulations, or by Fig. 12: World tanker order book quarterly 2001 – 2007 (in cgt) utilisation outside the oil trade. This explains the very low scrapping rates of tankers in the last years. At the 60 Liquefied gas tankers beginning of 2007, 339 single hull tankers with a capacity 50 of about 11.2 mill dwt which should have been phased out Chemical tankers 40 till the end of 2006 are still trading. t cg Oil tankers l 30 In 2004 and 2005, 10.2 mill dwt and 7.2 mill dwt, il m respectively were reported to be broken up. In 2006, only 20 152 tankers with 3.9 mill dwt were demolished. This is the lowest level since many years. 10

During 2006, 1,379 tankers with 92.9 mill dwt were added 0 to the order book. Thus, the volume has more than 01/I 01/III 02/I 02/III 03/I 03/III 04/I 04/III 05/I 05/III 06/I 06/III 07/I doubled compared to figures for 2005 (41.8 mill dwt).

Tanker fleet - future tonnage supply up to 2009/2010 (mill dwt) Explanatory note Fleet Order book The compensated gross tons (cgt) concept was first devised by Scrap % dwt shipbuilder associations, and adopted by the OECD Council Ship type Total potential share deliveries Working Party on Shipbuilding (WP6), in the 1970s to provide a Oil tanker 374.5 26.5 38.3 119.1 more accurate measure of shipyard activity than could be Chemical tanker 10.0 1.2 50.3 4.1 achieved by the usual gross ton (gt) and deadweight ton (dwt) Liquid gas tanker 26.9 2.4 66.5 16.6 measures. The compensated gross tons (cgt) is calculated by multiplying the tonnage of a ship by a coefficient, which is Total 411.3 30.1 40.4 139.8 determined according to type and size for a particular ship. Cgt Note: Based on fleet and order book figures as of January 1st, 2007; scrap potential: based on is used as an indicator of the volume of work that is necessary average age of broken-up ships in 2006 and phase-out tonnage for oil tankers. to build a given ship. The figures on future tonnage supply indicate that the Statistical details “The world tanker shipbuilding tanker fleet expansion will significantly accelerate in the market” mid term. An important issue over the next months is, ƒ Tanker order book and new orders by type p. 44 whether the strong increase of new tonnage will be ƒ Tankers on order by type and delivery schedule p. 45 ƒ Additions to the tanker order book by ship absorbed. Already in 2007 and 2008, 1,209 oil tankers with type and major countries of domicile p. 47 72.2 mill dwt , 183 chemical tankers with2.7 mill dwt and Guide to relevant market information: 239 gas tankers with 10.8 mill dwt will be delivered. Shipping & Shipbuilding Market ƒ Fearnleys: Fearnleys Review, Fearnleys Monthly: www.fearnleys.com ƒ Platou: Platou Monthly, Platou Report: www.platou.com 4 THE WORLD TANKER SHIPBUILDING MARKET ƒ Barry Rogliano Salles: BRS online market information: www.brs-paris.com 4.1 New orders and order book by tanker types ƒ Simpson Spence & Young: SSY World Oil-Tanker Trend: www.ssyonline.com During 2006, 1,379 new tankers with 92.9 mill dwt and ƒ Clarkson: Oil & Tanker Trades Outlook: www.clarksons.co.uk 29.6 mill cgt were added to the order book. Compared ƒ Petroleum Economist: www.petroleum-economist.com/ ƒ ISL Shipping Statistics Yearbook 2006 with previous year’s figures the order activities during ƒ IEAInternational Energy Agency: http://www.iea.org 2006 increased by 12 mill cgt (+ 68.5 per cent). The new ƒ Esso – Oeldorado: www.esso.ch orders, in terms of cgt, concentrate on oil tankers (75.6 ƒ BP – Statistical Review of World Energy http://www.bp.com ƒ EIA Energy Information Administration: www.eia.doe.gov per cent), chemical tankers (7.8 per cent) and liquid gas tankers (16.6 per cent share). As of January 1st, 2007, the total order book stood at 2,466 tankers equivalent to 57.4 mill cgt. This is an increase of 37.2 per cent compared to figures of January 2006 (cgt). Looking at the estimated delivery date, 16 mill cgt is due for delivery before 2008, 17.9 mill cgt will be available in 2008, and further 23.6 mill cgt 2009 or later.

4 SSMR March 2007 Short comment - World tanker fleet www.isl.org

Table 15 indicates the size distribution of the ordered tankers by type and cgt-measurement. Tankers in the size classes from 40,000 -120,000 dwt are of prime importance for the world shipbuilding industry. Moreover the average cgt-ration per tanker type underlines that liquid gas carriers had the highest ratio, namely in the size classes of 60,000 –80,000 dwt.

4.2 Leading shipbuilding countries The majority of tanker tonnage on order is attributable to yards in East Asia (Korea and Japan), which is especially true for crude oil and liquid gas tankers. Table 16 shows the massive predominance of Asian yards, which is not only reflected in the order book at the beginning of 2007 but also for the existing world tanker fleet as of January 1st, 2007. Only a tonnage share of 13 per cent of the existing tanker fleet was built on European yards. Today, tanker shipbuilding is largely attributable to Korean yards. Looking at the order book as of January 1st, 2007, South Korea is in the lead with 29.8 mill cgt equal to 51.9 per cent of the total world tanker order book, followed by Japan with 11.7 mill cgt (20.4 per cent) and China with 10.7mill cgt (18.6. per cent). Worth mentioning is that Chinese yards increased their cgt-share on the world tanker order book continuously. China is less specialised but has secured remarkable market shares of most tanker types. The order book share of Chinese shipbuilders stood at 18.6 per cent for all tankers, 25.6 per cent for oil tankers, 12.4 per cent for pure chemical tankers and only 4.1 per cent with regard to liquid gas carriers.

Author/Editor: Christel Heideloff

The ISL Editorial Team 2007

Editor/Author: Christel Heideloff (Senior Economist, Author/Editor) Editorial core team “SSMR 2007”: Reinhard Monden (Economist) Dieter Stockmann (Geographer) Zübeyde Gül (Economist)

SSMR March 2007 5