20 January 2014

Ship owners scrapped the most tankers in a decade during 2013:

It might not strike as a surprise, that among the negative sentiment experienced throughout most of the 2013 year in the tanker segment, owners of those vessels chose to scrap them at a 10-year high pace. According to the latest figures, compiled by shipbroker Gibson in its latest weekly report, during 2013, tanker tonnage sold for demolition last year amounted to 12.6 million tonnes (in deadweight terms), the highest total achieved since 2003.

According to Gibson, "total tanker demolition sales for the year exceeded the 2012 volume by 0.8 million dwt as trading conditions, particularly for the crude tankers, continued to be challenging for most of the year. Lightweight prices remained fairly firm throughout the year and closed December at around $435/lwt tonne (subcontinent), still around $15 higher than the corresponding period last year. Of the 105 tankers ( 25,000 dwt+) sold for scrap, exactly one third were less than 20 years old and importantly 72 vessels were double-hull" the shipbroker noted.

Among the tanker subclasses, 22 VLCCs (average age 18.9 years) were sold for demolition, with hallf the sales concluded in the third quarter. "VLCC tonnage accounted for half of the deadweight total scrapped at 6.4 million. The VLCC DIAMOND JASMINE (281,050 dwt) was just 14 years of age when sold to breakers in June, and the largest tanker sold for disposal was the SEAGULL (310,653 dwt), both to India. There were 11 Suezmax sales, while Aframax/LR2s numbered 28 (average age 21.7 years) accounting for 22% (2.7 million dwt) of all demolition. A small increase in MR/Handysize, up by 4 to 36 over last year, while Panamax/LR1 disposals totalled 8. Once again these numbers reflect the general pattern in the short term expectations of the tanker industry: concern for the crude market and stronger prospects for product tankers. Pakistan once again dominated tanker demolition, taking 6 million dwt (47 units). Bangladesh retained second spot with 2.8 million dwt, followed by India (1.7 million dwt)", Gibson noted.

It went on to add that "the 22 VLCCs sent for breaking last year is the highest number since 2003 when 27 sales were recorded. 2003 was an exceptional year for tanker demolition as the International regulations on the first phase of single-hull disposals became effective the following year. This year should see the removal of the last single-hull tankers. Of the remaining single-hulls, the majority no longer trade in the conventional tanker markets (storage or shuttle duties etc.). However many of these will be removed this year and their duties taken over by the first generation double-hull tonnage. Of course, as always, the worry for the tanker market is the pace that new orders are placed and following the slow start, 2013 saw a massive boom in fresh orders, particularly for product carriers. Although the tanker fleet continues to get younger, we expect more scrapping this year than 2013; there can never be too much recycling to bring about a faster recovery to the tanker market". Gibson concluded.

Meanwhile, in the crude tanker markets this past week, in the Middle East, Gibson said that "a nasty post-Holiday hangover hit hard for VLCC Owners as Charterers sustained discipline over the period built up visible availability, and undermined sentiment, to bring rates back to where they were at the end of October, last, and before the sustained upswing in the lead up to Christmas. Levels now stand at a relatively lowly ws 40 to the East (from a peak of w67.5), and ws 29 to the West (from a peak of w39) via Cape. The next period may well be busier with bargain hunters, but although rates should bottom out, a meaningful improvemennt will take sometime to re-engineer. Suezmaxes stuttered initially, but found strong interest late-week, which, coupled with continued Atlantic strength, to raise the rate-bar to around 130,000 by ws 95 East and ws 57.5 to the West with consolidation likely over the near term. Aframaxes scrapped around, but never found enough to get any real grip, and rates remained stuck at close to 80,000 by ws 115 to Singapore with little early change anticipated".

In the Mediterranean, "as in West Africa, Suezmaxes started a little uncertainly, but quickly had their faith restored by steady, sustained, demand and rates from the Black Sea moved up to 140, 000 by ws 140 to European options, accordingly, with up to a peak of ws 160 seen for a cross Med run, and US$44.5 million paid for Black Sea to Singapore. More of the same for a little while yet. Aframaxes spent the first half of the week in retreat, but then as balance was restored, rates began to move up again to 80,000 by ws 127.5 cross Med, though still a long way short of last week’s ws 15 peak mark. Weather has temporarily improved, freeing up  previously tied up units, so upside potential looks rather limited for now", Gibson noted.

Finally, in the North Sea, "week on week, Aframax rates haven’t materially changed, despite some inter-week fluctuation. 80,000 moves at ws 155 cross UKC with 100,000 by ws 145 the  mark ex Baltic, and ice still not yet a serious consideration - or a rate propellant - for the time being. Suezmaxes couldn’t fail to enjoy continued strength with West Africa and the Med being so buoyant, and rates of 135,000 by ws 115 Transatlantic, and US$ 4.9 million from the Baltic to South Korea were the result, and will continue similar whilst those other areas prosper. VLCCs stayed very thin on the ground, and saw little interest, but rate demands stayed at around US$5.25 million for Rotterdam to Singapore", Gibson concluded.

Source: carbon positive. 14 January 2014

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