Tradewinds: Newbuild Surge could Rock US Tanker Market Stability

“Poten & Partners noted that the nation’s cabotage market is susceptible to even the slightest shift in fleet capacity because of its size. “‘The outlook for the supply side of the Jones Act tanker market has changed significantly in recent years,’ said Poten when asked about trends shaping an industry governed by a cabotage law that prohibits foreign ships from transporting domestic cargoes coastwise. “‘There is no doubt that there has been a largely warranted resurgence in newbuilding activity on the medium-range (MR) products tanker front but we do have some concern that the marginal vessel in this type of a short-haul trade could challenge the sustained high rate environment.’ “In the years ahead, Poten also believes the expansion of capacity in the MR segment could ‘cannibalise’ demand for large articulated tug barges (ATBs) trading in the US Gulf, which is where freight rates for both types of tonnage are hitting record highs. “‘As with any shipping sector, the increased fleet size bears the potential for weaker freight conditions,’ said Poten. ‘It is important to remember that although most units — both ships and barges — are fixed on a term-charter basis to oil companies and other end-users, they regularly engage in relet activities that increase their utilisation and extend the overall vessel capacity on a fleet-wide basis.’ “If rates for ATBs and smaller classes of tonnage slide and newbuilding activity wanes as a result, the fallout could devastate countless US yards, since many are equipped to build tugs and barges — but only two are actively involved in building tankers. “According to Poten and other industry sources, there are 41 tankers, ATBs and large tank-barges on order in the US. The total, which includes unexercised options, suggests many segments of the Jones Act market will experience double-digit growth in the coming years.”