It appears that tanker owners believe that the premature scrapping of single-skinned vessels will more than offset the huge volume of new double-hulled units already set to deliver over the next two years. But post- Prestige euphoria can¡¯t go on forever. The orderbook was already substantial, with about 10% of the existing tanker fleet due to deliver during 2003 alone. But this year, an additional 24 VLCCs and 16 Suezmaxes have been booked.

Despite the uncertainty generated by politicians who mistakenly believe that double hulls will solve all tanker safety problems, and early doubts over the duration of the Iraqi conflict, the market seems to be spurred on by expectations that rates will stay firm for some time to come.

VLCC fixing is proceeding at a cracking pace. Prior to the end of the Iraqi conflict, Saudi Arabia lived up to its word by pumping more crude to compensate for Iraq¡¯s shortfall. This clearly benefits large vessels whose cargoes are principally long-haul, notably, bound for the US. But there are more than 60 new ships scheduled to join the fleet in the next 30 months, not far off 15% of the existing fleet.

The worry is that VLCC demand in the longer term will simply not be sufficient to absorb this volume of tonnage. Even before the Iraqi conflict, energy demand was forecast to show only modest growth of around 1.5% this year and next. Meanwhile, analysts point out that ton-mile demand may actually fall, as Venezuela resumes production and West African exports help to compensate for any Middle East shortfall.

However, it is Far Eastern demand that is driving the market at present. China continues to exceed all expectations. Crude imports during January and February totaled nearly 15 million tons, up more than 50% on the corresponding period one year earlier and equivalent to an annualized rate of some 90 million tons or so. The country¡¯s energy demand continues to surge whilst, at the same time, new refiners are seeking foreign export markets for products. Singapore and the US have both bought Chinese exports recently, but the country¡¯s authorities are anxious that booming energy demand at home is too reliant on Middle East production. About half of the country¡¯s crude oil comes from there.

Meanwhile, a dramatic fall in passenger bookings on cruiseships worldwide, following September 11th, has continued as the Iraq War began. The effect upon the cruiseship building industry has been equally dramaticthere has not been one ¡®pucker¡¯ cruiseship order since September 11th, the European shipbuilding industry, which relies heavily upon this market, suffering accordingly. The end of hostilities in Iraq will no doubt have some affect upon people¡¯s decision to cruise. However, the threat of terrorism, and the added problems caused by the virus SARS, continues to affect the industry. It would take a brave owner to order such a vessel under today¡¯s climate.