Growth in the product tanker market
In the product tanker market, demand for transportation, expressed in terms of ton miles, for the period 2004 to 2013 increased by almost 77%. Navios Maritime Acquisition’s (NNA) management expects the compounded annual growth rate (or CAGR) to be similar in 2014. NNA expects this figure to be 12,468 billion ton miles.
Tanker demand growth has been greater than increases in overall trade, as more ships are employed on longer trade routes. Data from existing product tanker routes and new refinery startups suggest more vessels will shift eastward. In NNA’s product tanker sector, tanker non-deliveries stood at 2.7 million deadweight delivered compared to the projected 4.2 million deadweight delivered through 2Q14.
NNA says that about 6% of the current product tanker fleet is 20 years of age or older. Meanwhile, the orderbook stands at 27.5 million deadweight, or about 21% of the fleet, a level usually considered adequate for regular replacement of an existing fleet with little or no demand growth. Higher scrap prices are likely to encourage further scrapping of older or single haul units. Demolition prices appear to depend on overall steel prices and not the supply of vessels.
The bright outlook for the product tanker is likely to benefit NNA and its peers, including Teekay Tankers Ltd. (TNK), Tsakos Energy Navigation Ltd. (TNP), Scorpio Tankers Inc. (STNG), and Capital Product Partners (CPLP). Further, the Guggenheim Shipping ETF (SEA) would also be in an advantageous position.