Deletion Forecast Methodology
Feb. 13, 2018
We continue to analyze and enhance our own forecasting methodologies with each annual Tanker Market Outlook cycle and this year is no different as we have improved our long-term deletion forecast methodology. Deletions from the trading fleet can occur through demolition or conversion of tankers to storage operations. In each of these cases, the owner has made a fundamental decision based on unique characteristics of their financial situation, market view and investment criteria. In previous Tanker Market Outlook editions, our criteria for determining future deletions from the fleet were the 15th, 20th and 25th ship anniversary. In our reference case, all vessels reaching their 20th and 25th year of existence were removed from the trading fleet. Our high case included the 15th year, while the low case only factored in the 25th year.
In the 2018-2022 Tanker Market Outlook, we investigated historical deletions patterns of owners and classified these vessel exits on an age basis. Using data from the beginning of the decade, our analysis showed that vessels were deleted from trading fleet either through demolition or conversion sales as young as age 5, although these were sporadic and for unique reasons. In using the VLCC fleet as an example, we determined that the majority of deletions were concentrated in years 22-24 with an average of 52% of vessels reaching those ages over the last seven years were deleted in that year (Figure). The observed ratios for each sectors were applied to the respective fleets in order to drive our final deletion forecasts for the 2018-2022 period, with consideration being made to avoid “double-counting” of any deletions.
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