THE ZEN OF FORECASTING TANKER DEMAND

Part Two of a Two Part Series

by Geoff. Uttmark

GOTCHA!!

Saunter up to the bar in an owner’s club in any world maritime center and the lament of the old men is the same: “It isn’t as easy to make money in shipping as it used to be.” And they are right. Not to disparage in any way the spectacular achievements of legends like Y. K Pao, D. K. Ludwig, Aristotle Onassis and Stavros Niarchos – members of that rarest breed of men who find ways to dominate any set of circumstances instead of circumstances dominating them – consider the advantages the old men enjoyed in their younger years. From the end of World War II until the first oil shock in 1973, world economic growth often exceeded three percent or so per year, consistently. War-surplus, ever so reliable T-2 work horses were cheap, and long-term charters with oil majors were common. In short, an owner could do well simply by riding the general economic expansion and not making any serious mistakes. By comparison, today’s more integrated world economy is also more volatile, tankers are expensive assets that come with liabilities additional to financial, a full payout charter is usually the first fantasy vaporized by morning’s coffee, and the day’s first telephone call is as likely from a lawyer or regulator as from a broker. For conspiracy theorists, it’s almost as if the Gnomes of Zurich have designed GOTCHA!, a shadowy Global Oil Tankers Charterer’s Association, to confound the independent tanker owners. But owners have their own hand in penning the sardonic advice on how to make a small fortune in shipping: start with a big one. It is their signatures on the contracts, not the banks’ willingness to lend or the yards’ eagerness to build, which produce the tonnage surpluses. And it is the owners – both independents and tanker arms of oil companies – who have literally given away the store to shippers in the form of rock bottom freight rates rather than take some of their investment in improved efficiency to their own bottom lines.

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