Suezmax orderbook as a percent of fleet is near 10%, while the ratio for Aframax is slightly higher, according to DryShips Inc. It’s important to note that when looking at orderbook, it’s best to look at the aggregate rather than one specific class, because tanker sizes are substitutable. If rates for a large vessel class such as VLCC rise substantially, they can pull rates for smaller vessels up.
Managers’ sentiment improves
The direction of the orderbook level is another important figure to look at because it reflects companies’ expectation of future rates and industry profitability. If rates are expected to improve or if newbuild (new vessel) prices are attractive, companies will place orders for new vessels. If rates are expected to rise substantially, orders will climb. But when rates are expected to fall, orderbooks will fall as companies refrain from ordering new vessels while existing orders get delivered. In a sense, the orderbook is managers’ sentiment index.
Navios Maritime Acquisition Corp.’s (NNA) latest earnings presentation’s orderbook for VLCCs (very large crude carriers) showed that managers have been pretty optimistic, placing as much as 16.1 million deadweight capacity throughout 2013, reversing past the few years of downtrend: 9.3 million in deadweight was ordered in 2010, 8.9 million in 2011, and 6.9 million in 2012. Current orderbook remains ~12% of existing capacity, which is pretty manageable, considering it has historically been around 20%.
For those who have followed us from last year, overall orderbooks for tankers based on IHS Global’s data started to turn up in December 2013, and are now in an upswing, reflecting managers’ optimism at companies like Frontline Ltd. (FRO), Nordic American Tanker Ltd. (NAT), Teekay Tankers Ltd. (TNK), and Tsakos Energy Navigation Ltd. (TNP).