Jens Martin Jensen, CEO of tanker company Frontline Ltd. [NYSE:FRO] (Frontline), says the industry should create a fund to encourage the scrapping of excess very large crude carriers (VLCCs), industry news site ShippingWatch reports.
"We're all burning our money in this market and something needs to happen," Jensen said.
"This could be a pool that offers a few million USD in premium.
"Instead of a price of USD 16 million on the scrapping market, for instance, the fund would offer USD 18 million."
Frontline has said it plans to scrap ships that are more than 15 years old, assuming there is no major change in the market.
There is a surplus of about 70 ships in the global market, and 60 ships are over 15 years old, which means if the fund encouraged the scrapping of all those ships it could eliminate the market imbalance.
Even as Frontline is scrapping vessels, the related company Frontline 2012 has ordered 60 ships, including MR and LR tankers and gas carriers, and other companies including Scorpio Tankers Inc. [NYSE:STNG] (Scorpio Tankers) have also been on buying sprees for these types of vessels.
Jensen said Frontline does not want to "scrap the total fleet with the one hand while using the other hand to acquire a new, cheaper, more environmental fleet," but he said the newbuilding contracts were made at the right time.
Along with various private companies, China has been pushing for increased scrapping.
Source: ship and bunker. 13 September 2013http://shipandbunker.com/news/world/731932-frontline-calls-for-vessel-scrapping-fund