Hellenic Shipping News: Jones Act Tankers Could Be Headed For A Storm, As Overcapacity Looms Large

6 Oct 2015: “The miss timing of the Jones Act tanker market, in terms of meeting higher demand when there was a need for it, could lead to overcapacity problems and potential freight rate falls in the coming months and years, warned Poten & Partners in its latest weekly report. “Attempting to discern the future of the market, Poten first described how we got here in the first place. “Attempting to discern the future of the market, Poten first described how we got here in the first place. It all started, as a result of the lack of transportation infrastructure, necessary to meet the increased demand which rose from the increase of domestic crude flows. “‘Shipowners have also expanded capacity, encouraged by rapidly increasing rates and the willingness of oil companies to enter into long-term charters at attractive terms. More vessels may have been ordered if it was not for two (related) factors holding shipowners back: very high prices and limited shipbuilding capacity’, said Poten. “‘There are only two shipyards in the U.S. that build tankers at the moment: Aker Philadelphia Shipyard and the NASCCO shipyard in San Diego. Both have limited capacity and cannot deliver a vessel before 2018’, said Poten. “As a result, Poten noted that the outlook for the Jones Act tanker has definitely worsened. The analyst concluded by noting that ‘while higher cost rail shipments will be the first to absorb reduced volumes, expanded pipeline capacity will also reduce demand for tanker movements. Tanker newbuildings without fixed employment as well as the vessels that will come off charter the coming years will face a more challenging rate environment’, Poten concluded.”