Investment Cycles in the Newbuilding Market of Ice-Strengthened Oil Tankers

Abstract

Investment cycles and their modelling have been under the interest of system dynamics since long ago. Most often these cycles are caused by the uncertain profitability expectations involved in long-term capital investments, as well as the long manufacturing processes of the needed buildings, machines and/or equipment. This paper concentrates on the investment decisions of class I A ice-strengthened oil tankers. In the European oil transport market, these tankers are required only in the Baltic Sea region, and especially in the oil terminals of the Gulf of Finland. The demand for these special class tankers can be derived from the handling capacity available in the most important Russian oil export terminal, Primorsk. However, in the near future, planned capacity enlargements in Primorsk will create additional dynamics. Based on the simulation results, we argue that terminal capacity could not be used in full scale in the near future, if the use of appropriate ice-strengthened tanker capacity is favoured. However, if oil exports are aimed to be completed with I A class vessels, this class of tankers will face a newbuilding boom, which is expected to last at least for the next 10 years.