Oil Tankers Valued as Scrap Jump Fivefold as Returns Collapse:

Nov. 25 (Bloomberg) -- The number of the largest oil tankers valued at scrap-metal prices jumped fivefold in a year as a glut of the vessels cut their earnings to the lowest level since at least 1997, Seasure Shipping Ltd. said.

101 very large crude carriers are now valued at demolition prices, up from 19 a year ago, the London- based shipbroker’s VesselsValue.com unit, which publishes prices of more than 45,000 vessels, said by e-mail yesterday. The global fleet contains 575 of the ships. The average age of the 101 VLCCs at scrap value was 18 years, according to Seasure.

“A lethal combination of falling asset values driven by poor earnings, financial distress and a strong market for scrap steel has beached an increasing number of vessels at or close to demolition value,” Alex Adamou, lead quantitative analyst at VesselsValue, said in the e-mail. “A vessel which would have traded at an 81% premium to her demolition value in January now finds herself valued as nothing more than a floating piece of steel.”

Frontline Ltd., the world’s largest VLCC operator, said this week it’s seeking talks with creditors and may run out of cash and breach loan terms. Earnings from the vessels averaged $11,372 a day in the third quarter, the lowest since at least 1997, according to Clarkson Plc, the world’s biggest shipbroker. General Maritime Corp., the 2nd-largest U.S. oil tanker owner, filed for bankruptcy Nov. 17.

Oil Demand:

Tanker owners ordered too many new vessels during a 4-year boom that lasted to 2008, creating an oversupply that’s depressed returns and ship prices as global demand growth for crude weakens. In the Persian Gulf, the largest loading region, ships competing to haul crude have outnumbered cargoes by 16% on average this year, according to weekly shipbroker and owner surveys by Bloomberg.

Returns for VLCCs will average $15,000 a day for the next 2 years, less than half of the $34,500 they need to break even, Pareto Securities ASA said in a report last month. Average earnings for the vessels, which peaked in 2004 at $97,000 and were at $93,000 four years later, fell to $19,000 by 2011, according to the Oslo-based investment bank.

Prices for 15-year-old VLCCs have tumbled 44% since the start of the year as scrap values rose 2%, said Adamou of VesselsValue.

Demolition value is calculated by multiplying the price of steel scrap by light displacement long tons, or the weight of a ship’s hull, machinery and equipment.

About 47% of crude oil traded is shipped by sea, Pareto said.

--Editors: Dan Weeks, Sharon Lindores.

Source: By Michelle Wiese Bockmann (mwiesebockma@bloomberg.net). 25 November 2011

http://www.businessweek.com/news/2011-11-25/oil-tankers-valued-as-scrap-jump-fivefold-as-returns-collapse.html

Shipping Corp plans to sell 13 ships for breaking by March:

The country’s biggest ocean carrier, the state-run Shipping Corp. of India Ltd, plans to sell up to 13 ageing vessels for breaking by March as it looks to shore up performance.

“Our plan is to sell 15–17 ships this fiscal, out of which we have sold 4 ships so far,” said Arun Kumar Gupta, a director at Shipping Corp.’s technical and offshore division. On average, these ships are 25 years old.

SCI runs a fleet of 82 ships, including bulk carriers, oil tankers and product and chemical carriers. It has another 26 ships under construction at various Indian and overseas yards.

Globally, fleet owners are disposing uneconomical assets as new ships enter service at a rapid pace and increase the number of modern, more efficient vessels.

As a result, charterers (those hiring ships) are showing less preference for ships built 20-25 years ago.

Shipbreakers globally have chopped up ships with a combined cargo-carrying capacity of 33 million dead weight tonnes, or dwt, since January, a 64% increase over the same period last year, according to London-based Clarkson Research Services, a unit of Clarkson Plc., the world’s largest ship broker.

In terms of numbers, 786 ships have been demolished globally so far this year, compared with 732 in the same year-ago period.

The main driver behind the rise is a near threefold surge in dry tonnage (capacity) sold for scrap, which has risen 290% to 19.6 million dwt this year, Clarkson Research said.

“It is not viable to operate 25-year-old ships because charterers do not want vintage vessels,” Gupta said. “We have to spend more on repairs and maintenance of older ships. Besides, the acceptability of such ships at ports is less. When freight rates are under pressure, there is no point running older ships and keep sustaining losses.”

Shipping Corp. reported a loss of Rs.146.46 crore for the 1^st half of this fiscal year, compared with a net profit of Rs.450.46 crore a year earlier.

It earned Rs.32.41 crore from the sale of 2 of the 4 ageing ships in the first half, compared with Rs.143.49 crore from the sale of 6 ships a year earlier. The other 2 ships were sold in October and the sales will be recorded in the 3^rd-quarter results.

Much of the losses (Rs.140.6 crore) came in the 2^nd quarter when the firm sold just 1 ship for scrapping, earning Rs.20.13 crore, compared with Rs.128 crore earned in the year-earlier 2^nd quarter from the sale of 5 ships.

In the year to March 2011, Shipping Corp. earned Rs.200.98 crore from the sale of 8 ships for dismantling.

Shipping Corp.’s finance director B.K. Mandal explained that the main contributors for the 2^nd quarter loss, apart from depressed freight rates, were lower income from the sale of ships, higher depreciation and ship fuel costs, and an increase in the interest cost due to the revaluation of foreign currency loans.

“In a dire market, (both dry bulk and tanker) owners may opt to scrap even younger vessels due to weak freight markets,” said Erik Stavseth, a shipping analyst at Oslo-based investment bank Arctic Securities ASA. Stavseth said there are three ways to restore the supply-demand balance and help return the shipping industry to profitability. These include scrapping vessels, laying up ships and refraining from ordering new ships.

Shipping Corp. has lost more than half of its value on BSE this year, while the Sensex has shed about 20%.

On Thursday, Shipping Corp.’s shares fell 1.5% to Rs.61.45 on BSE and the benchmark index dropped 1.9% to 16,461.71 points.

Source: Live Mint. By P. Manoj (p.manoj@livemint.com). 18 November 2011

http://www.livemint.com/2011/11/17211108/Shipping-Corp-plansto-sell-13.html?atype=tp

Oil-Tanker Rates Seen Rising as Scrap Values Speed Up Demolitions: Freight

Oil-tanker companies may demolish the most ships since 2003, lifting charter rates from their lowest in at least 14 years, as values of older vessels trade 36% above the price of scrap.

The cost of 15-year-old tankers fell 48% to $23.5 million this year as scrap values advanced 3% to $17.25 million, the narrowest gap in at least 5 years, according to data from the world’s 2 largest shipbrokers. Owners may break up 5% of the fleet within 18 months, the most in 9 years, said Michael Pak, an analyst at Clarkson Capital Markets LLC in Houston.

While scrapping would reduce the glut and raise rates, it won’t be enough to make ships profitable. Freight derivatives, traded by brokers and used to bet on future rates, anticipate a 68% jump to $12,817 a day in 2013 compared with the average so far this year. That’s still 43% of what Frontline Ltd., the biggest operator, says it needs to cover costs. 16 months of unprofitable charters and falling ship values are lowering expectations from as recently as 3 months ago, when analysts anticipated fewer demolitions.

“Owners’ perceptions are changing as we speak,” said Charlie Fowle, chairman of London-based shipbroker Galbraith’s Ltd. “Even those who are more bullish will think it’s not worth buying 15-year-old ships if this market continues.”

Owners scrapped 8%of the very large crude carrier fleet in 2003, according to Clarkson Research Services Ltd., a unit of Clarkson Plc, the world’s biggest shipbroker. Rates surged 87%to $98,323 the following year, its data show.

Crude Carriers:

Single-voyage rates for very large crude carriers, hauling about 20% of the world’s oil, averaged $7,627 a day this year, compared with $32,006 in 2010, according to the London- based Baltic Exchange, which publishes costs along more than 50 maritime routes. Rates settled at $12,200 yesterday. Longer-term contracts are also unprofitable, with a 15-year-old tanker earning $16,000 a day on a one-year accord, according to London- based Clarkson.

Vessels in service since 1996 or earlier comprise 14% of the global fleet, which expanded 11 percent to 554 ships since the end of 2008, according to data from Redhill, England-based IHS Fairplay. Owners ordered the most new vessels in 4 decades in 2007 and 2008, when returns in the spot market were 14 times higher than now. Hamilton, Bermuda-based Frontline will report its 1st annual loss in 9 years for 2011, analyst estimates compiled by Bloomberg show.

Double Hulls:

Owners will probably start demolishing older double-hulled tankers before the end of this year, said Jens Martin Jensen, the Singapore-based chief executive officer of Frontline’s management unit. It would be the first time for the vessels, built with an extra layer of steel to reduce the risk of spills, according to IHS Fairplay. Frontline’s fleet includes three double-hulled tankers built in 1995.

Scrapping may be postponed should earnings improve. Daily rates on the benchmark route to Japan from Saudi Arabia jumped 19-fold to $10,479 last week after oil companies and traders booked the most tankers to load Persian Gulf cargoes in at least 7 years, according to data from Galbraith’s. That’s 65% below Frontline’s break-even level.

China’s economy accounts for about 10% of oil consumption and will expand 9% next year, or more than twice the speed of global growth, according to the International Monetary Fund. World crude demand will rise by about 1.3 million barrels to 90.5 million barrels a day in 2012, the Paris-based International Energy Agency estimates. The gain is equal to about 237 additional cargoes for the largest tankers.

Vessel Speeds:

Rising returns may encourage shipping companies to sail faster, effectively increasing the number of ships competing for business. The average VLCC is proceeding at 10.4 knots, compared with as much as 12.2 knots in 2008, according to data compiled by Bloomberg. Owners cut speeds when rates decline to limit fuel costs.

Freight derivatives indicate the past week’s gains won’t be sustained. While the December contract trades at $15,117 a day, 24% more than now, rates are projected to decline for the next few months to $8,245 by April, according to data from Marex Spectron Group, a London-based broker of the contracts.

The slump in tankers is being mirrored in ships carrying other commodities and manufactured goods. Daily rates for capesizes, hauling iron ore and coal, averaged $13,839 this year, below the $20,000 they need to break even, Baltic Exchange data showed. An index reflecting charges for 6 types of containers fell 38% since the start of April, data from the Hamburg Shipbrokers’ Association showed.

Frontline Stock:

Shares of Frontline slumped 77% this year in Oslo, reducing its market value to 2.66 billion kroner ($466 million) from 27.7 billion kroner in June 2008. The company will report a net loss of $112.7 million for this year, the worst result since at least 1996, according to the mean of 19 analyst estimates compiled by Bloomberg. The MSCI All-Country World Index of equities retreated 8.1% since the start of January.

Double-hulled tankers that were 15 years old were sold for as much as $114 million in 2008, according to data from London- based Simpson, Spence & Young Ltd., the second-largest shipbroker. The incentive to demolish the ships now may be higher than suggested by the narrowing premium to scrap.

Clarkson’s assessment of the demolition value is based on single-hulled tankers. Those with double hulls would be worth more because they yield more steel, said Calum Kennedy, an analyst at the shipbroker’s research unit in London. The vessels also need surveys of seaworthiness every five years, which can cost $1 million to $2 million, potentially adding to costs for buyers of older transports, said Pak in Houston.

Tanker Scrapping:

Bangladesh handled 78% of all crude and oil-product tanker scrapping in 2009, followed by Pakistan with 10% and China with 8%, according to the latest data from the United Nations Conference on Trade and Development.

Anyone buying an older tanker may also have more difficulty in winning cargoes. Oil companies are increasingly favoring newer vessels, which tend to be better maintained, said Per Mansson, the managing director of Norocean Stockholm AB, a shipbroker in the Swedish capital.

“Owners have a challenging economic decision ahead of them,” said Pak. “If your view is that we are going to be in this situation for the next couple of years, if your horizon is a two- to three-year outlook of depressed earnings, the decision becomes more and more compelling to scrap the ship.”

To contact the reporter on this story: Alaric Nightingale in London at anightingal1@bloomberg.net

Source: Bloomberg.com. By Alaric Nightingale 15 November 2011

http://www.bloomberg.com/news/2011-11-15/oil-tanker-rates-seen-rising-as-scrap-values-speed-up-demolitions-freight.html

Exxon Mobil Creates Green U.S. Recycling Jobs:

Decides Not to Dump its Old Tanker on Asian Beaches

Seattle, WA. | November 8th, 2011 – 

Instead of sending their defunct tanker to the infamous ship-scrapping beaches of South Asia, Exxon Mobil and wholly owned subsidiary SeaRiver Maritime, recently completed the sale of the S/R Wilmington, a 1984 built tanker, to a U.S. ship recycling facility, where it will be dismantled by a skilled workforce, using advanced technologies to manage the vessel’s hazardous waste stream. Exxon’s move to recycle the Wilmington in the U.S. is seen by the toxic trade watchdog organization, Basel Action Network (BAN), as a move to lead by example, opting for the safe and environmentally preferable ship recycling methods of U.S. ship recyclers, while creating green U.S. jobs in a tough economy.

“We applaud this decision and hope this is a harbinger of many more such corporate choices – to internalize costs and not use the global commons or developing countries as convenient dumping grounds for pollution and harmful activities,” said Mr. Colby Self, Green Ship Recycling Campaign Director for BAN.

This move is in stark contrast to some of Exxon’s competitors including BP, who often send their retired fleets to the shipbreaking beaches of South Asia, where nearly a quarter of the exploited workforce at these yards are child laborers making less than USD$1 per day, and where little is done to protect their health and safety or that of the environmentally sensitive tidal flats where these vessels are scrapped.

Because of its age, the Wilmington is suspected of containing a host of hazardous wastes within its construction. These wastes cannot be managed in an environmentally sound manner on the shipbreaking beaches of India, Pakistan and Bangladesh, where approximately 90% of the obsolete global shipping fleet is dismantled. Using advanced technologies at U.S. ship recycling facilities, these wastes, including PCBs, asbestos, lead, and mercury are contained and managed with proper care, while approximately 91% of the vessel, including critical metal resources such as steel, aluminum, and copper, are fully recycled and recirculated into the marketplace, thereby reducing demand for environmentally destructive primary metal mining and related carbon emissions.

“BAN is pleased with this outcome after having been in close contact with Exxon/SeaRiver for months,” said Self. “Building on this positive result, we now call on Exxon to further lead by example to make a corporate commitment to Off the Beach environmentally sound management of all end-of-life vessels owned, operated or leased on behalf of Exxon/SeaRiver.”

The NGO Platform, of which BAN is a part, is seeking an “Off the Beach Commitment” from all enterprises utilizing shipping. This Commitment entails agreeing to ensure that the ships used by a company directly or under contract, do not find their way to the beaches of South Asia at end-of-life.

Source: Basel Action Network (Media Press Release). 8 November 2011

http://www.ban.org/2011/11/08/exxon-mobil-creates-green-u-s-recycling-jobs/

SR WILMINGTON, Photography by Chris Hunsicker 

Details of Vessel - SR WILMINGTON - IMO 8109670

Ship Type: Chemical Tanker

Year Built: 1984

Length x Breadth: 193m X 32m

Draught: 24.1 m

Gross tonnage: 27,508 tons

DeadWeight: 48779 t

Speed recorded (Max / Average): 11.2 / 8.3 knots

Flag: USA [US] 

Call Sign: WBVZ

MMSI: 367493000 

IMO: 8109670

Builder: Avondale Shipyard, New Orleans La, USA

Owner: Exxonmobil - Irving Tx, USA

Source: Marine Traffic. 14 November 2011

http://www.marinetraffic.com/ais/showallphotos.aspx?imo=8109670

Shipbreaking spoiling environment in Gadani:

Shipbreaking with out safety measures at Gadani is hazardous to health and spoiling environment

Nasir Mansoor,Deputy General Secretary of National Trade Union Federation (NTUF) and Bashir Ahmed Mehmoodani, President of Ship Breaking Democratic Workers Union, Gadani have drew the attention of governmental environmental agency and other concern departments towards the deteriorating and alarming environmental situation which plying havocs with the lives of thousands of workers at Gadani Shipbreaking yards.

The ships and oil tankers which were anchored by the owners at Gadani beach for dismantling never heed to the demands of workers representatives to observe the safety measure for the protection of workers and environment and ecology of the area. The anti environment activities have been going on with out any consideration which become harm full for the health of workers and also for the population lives near by.

The trade union leaders stated that recently an "Oil Tanker" named "WENJIANG" has been dismantling at yard number 54 owned by M/S Seth A. Gafoor. The oil tanker is leaked and oil is spreading on the beach and nearly one kilometer of the radius has been covered with the dirty oil.

More than 500 workers are working on breaking the ship (oil tanker) and they all complained of severe skin allergies and acute respiratory problem due to widespread oil smell in the environment.

Nasir Mansoor and Bashir Mehmoodani demanded observance of international environmental protection standards and workers safety measures in shipbreaking sector in Gadani. They also demanded to stop the dismantling the oil tanker "Wenjiang" which emitted the hazardous oil in the sea water and to held inquiry on the issue in detail.

Nasir Mansoor

03003587211; www.ntufpak.org

Source: IMO Watch. 26 October 2011

http://imowatch.blogspot.com/2011/10/ship-breaking-spoiling-environment-in.html

Oil-Tanker Losses Double as Growth in Supply Overwhelms Demand:

Losses for owners of supertankers hauling 2 million-barrels of crude oil to Asia from the Persian Gulf more than doubled as a glut of ships overwhelms demand.

Very large crude carriers, or VLCCs, on the benchmark Saudi Arabia-to-Japan route are losing $4,452 a day, compared with $2,116 yesterday, according to data from the Baltic Exchange in London. Rates have been negative since Aug. 26, according to the exchange, which covers more than 50 maritime routes.

“The excess supply limits the probability of any short term increase in rates,” Martin Korsvold, an analyst at Pareto Securities AS in Oslo, wrote in an e-mailed report today.

Global demand for supertankers will expand 5.2% this year to 144.3 million deadweight tons, according to Clarkson Research Services Ltd., a unit of Clarkson Plc, the world’s largest shipbroker. The fleet will swell almost twice as fast, expanding 9.9% to 176.9 million tons, it estimates.

Rental income can be boosted by reducing a ship’s speed on a return journey after a vessel has unloaded its cargo, saving fuel costs. The price of ship fuel, or bunkers, advanced 25% from the start of the year to $636.50 a metric ton, data compiled by Bloomberg from 25 ports worldwide showed.

Earnings estimates from the exchange don’t reflect speed alterations that can cut fuel consumption. Owners have yet to curb the glut either by reducing speeds, scrapping ships or mothballing tankers, even with rates on about 3-quarters of routes at “multi-year” lows, Goldman Sachs Group Inc. analyst Edouard Baldini in London wrote in a Sept. 19 report.

Charter rates for VLCCs on the benchmark voyage decreased 2.9% to 42.68 Worldscale points, according to the exchange. The points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

The Baltic Dirty Tanker Index, an overall measure of shipping crude oil that includes vessels smaller than VLCCs, was unchanged at 693 points, according to the exchange.

Source: Bloomberg. By Rob Sheridan (rsheridan6@bloomberg.net). 28 September 2011

http://www.bloomberg.com/news/2011-09-28/oil-tanker-losses-double-as-growth-in-supply-overwhelms-demand.html