markets crude carriers
Demolition is helping to salvage a tough VLCC market
A tough trading environment means it is a charterers’ market for VLCCs. Scrapping offers some respite, and favourable rates per ldt suggest this trend is set to continue
by Barry Luthwaite O
ptimism that the 2010 deadline for the phase-out of single-hulled tonnage would boost the VLCC market in 2011
now looks misplaced. Values are falling for trading vessels, and there has been a corresponding price drop in newbuildings offered for resale by worried owners. Spot charter rates are depressed, though some owners with ships in the right place at the right time are seeing rises. Time charters are in short supply as the oil
majors have cooled interest and lucrative rate time employment from new deliveries in the boom is now ending. Only 10 VLCCs have been ordered this year to add to a backlog of 177 vessels aggregating 55,832,661 dwt. The global VLCC trading fleet numbers about 550 ships with only 22 single-hull units left. Two of the VLCCs delivered this year have
been anchored off Labuan after sketchy spot employment. Understandably, owners are reluctant to confirm details of unemployed vessels. Malaysian, Indonesian and Singapore anchorages are likely to fill up unless there is a dramatic trading improvement. There are cases of vessels being taken over by shipyards and reluctantly traded until a buyer can be found. In spite of this situation, there are owners
negotiating VLCC orders. Global Energy Maritime Corp (made up of Taiwan state energy company CPC Corp, U-Ming Marine and Chinese Maritime Transport) is poised to order six VLCCs by the end of this year to serve domestic imports. The move is part of a fleet upgrading plan that will see eight single-hull crude tankers scrapped. The Chinese Government’s plan to add 20 VLCC newbuildings to the national fleet, which were already allocated to building yards, has been dropped for now, so owners can breathe a sigh of relief – especially those engaged in operating chartered in tonnage for Chinese crude imports. Chinese Merchants Energy Shipping (CMES) has reserved provisional building slots
www.tankershipping.com
Scrapping prices presently offer an attractive return
at Guangzhou Longxue Shipyard and Dalian Shipbuilding Industry for two high specification VLCCs at each yard. This order forms part of a 10-ship plan, but the balance may not be crude carriers. Financing is in place to acquire the vessels over the next three years and hard negotiations may well secure a price of only US$90 million apiece for the VLCCs. Long-term contracts of affreightment are guaranteed as China seeks less dependence on charter tonnage. Consideration will be given to secondhand acquisitions but probably not for the VLCCs. Owners testing the water for newbuilding
resales are shocked at potential buyer valuations. One Greek owner ordered 10 Suezmaxes at the end of 2009 at a very reasonable US$63.3 million apiece but offers for possible resale of the first two at US$70 million plus fell on deaf ears. It is a similar scenario in the secondhand trading market: in some cases 1990s-built double-hull tonnage asset values have fallen by 30 per cent. It is difficult to obtain a decent price even for tonnage built since 2000 unless built-in charters are offered. Conservative Greek owners are past masters at exploiting this kind of situation, but the difference is that they now sustain their well-deserved trading reputations through ultra-modern fleets built on newbuildings. There are fewer bargain takers but owners
seeking double-hull tonnage can be found. Embiricos snapped up an 11-year-old VLCC for just US$36 million, setting a new low value benchmark.
Just six months ago a similar vessel attracted US$51 million. Two more 1999-built VLCCs received US$38 million offers but had more capacity than the Embiricos vessel. The Greek owner also purchased a 1995-built VLCC for US$25 million and cleared out single-hull units at high recycling prices. The latter purchase came with special survey passed, so other mid-1990s tonnage without this notation will attract even less value. Demolition, though, is a bright spot: 13
VLCCs and six Suezmaxes have dismantled this year, these numbers boosted by the inducement of average prices of $520 per ldt, which are holding up well. Turning more closely to the Suezmax sector,
prospects generally seem more optimistic. Mindful of declining Suezmax values, Sungdong rejected offers of US$61 million each for two ex-Tsakos units originally ordered at US$70 million each in 2009. One of the duo was agreed at US$66 million, six months ago, but the sale fell through. The shipyard will postpone deliveries for the time being. Nordic American Tanker recently added a
1999-built unit to its fleet from Hellespont Shipping and will shortly take delivery of two newbuildings ordered at US$65 million each from Samsung, bringing its fleet up to 19 units all centred on the Suezmax trades. The latter offers more flexibility for loading and discharge ports, especially in West Africa and the Caribbean, and is a particular favourite for Chinese crude imports. TST
Tanker Shipping & Trade I October/November 2011 I 63
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68