Tanker demolition levels rise by double-digit rate during 2012

2013-02-07

As tanker owners became less and less optimistic during the course of the past year, as a result of heavy downward pressure of freight rates on most markets, they were compelled to scrap more second hand tonnage. As a result, according to the latest report from London-based shipbroker Gibson, "total tanker demolition sales for the year amounted to 11.8 million dwt, up by 2.3 million dwt over the volume achieved in 2011. The poor trading conditions experienced by some markets during the year, particularly for the crude tankers, coupled with the arrival of the Eco ships, continued to push second-hand prices to exceptionally low levels. However, scrap lightweight prices remained fairly firm particularly through the 1st quarter which resulted in second-hand values of tankers (15 years of age+) falling close to scrap values" said the shipbroker.

It added that "of the 108 tankers (25,000 dwt+)sold for scrap, almost one third were less than 20 years old. (The total included 71 double-hull vessels).Looking back at last year's statistics, 14 VLCCs (average age 20.5 years) were sold for demolition with half the sales concluded in the 1st quarter. The VLCC ATLANTIC PROSPERITY (311,689 dwt) was just 16.2 years of age when sold o Indian breakers in January and has the distinction of being the largest tanker sold for disposal in 2012. There were 19 Suezmax sales (11 more than 2011) while Aframax/LR2s numberes a further 36 (average age 21.4 years) accounting for 33% (3.4 million dwt)of all demolition sales. MR sales fell to 32,down from 55 last year, while Panamax sales equalled last year's 7. It is no surprise this reflects the general pattern in the expectations of the tanker industry: concern for the crude market and stronger prospects for product tankers" said Gibson in its report.

In terms of scrapyards, it mentioned that "India's short domination as the region of choice for tanker demolition came to an end with Pakistan taking the central role at 6 million dwt. Bangladesh retained second spot with 3.1 million dwt, followed by India (1.9 million dwt). Tougher regulations on the import and disposal of tonnage coupled with competition from dry bulk sales has moved the emphasis away from the traditional Bangladesh/India domination. However, demand for scrap steel remains high, which has supported lightweight prices. A cocktail of factors could yet force more sale activity throughout this year as more regulation, environmental commitments and basic economics will put more tanker tonnage to the torches of the Asian recycling industry: the question is how much?" Gibson concluded.

Meanwhile, in its market outlook for the tanker segment, ship owner Knightsbridge Tankers noted that "the market rate for a VLCC trading on a standard 'TD3' voyage between the Arabian Gulf and Japan in the fourth quarter of 2012 was WS 42.8, representing an increase of approximately WS 7 points from the third quarter of 2012 and a decrease of approximately WS 15 points from the fourth quarter of 2011. Present market indications are approximately $8,000 per day in the first quarter of 2013. Bunkers at Fujairah averaged $615/mt in the fourth quarter of 2012 compared to $650/mt in the third quarter of 2012. Bunker prices varied between a low of $593/mt on November 5th and a high of $655/mt on October 1st".

In terms of oil demand, the company said that "the International Energy Agency's ("IEA") January 2013 report stated an OPEC oil production, including Iraq, of 30.9 million barrels per day (mb/d) in the fourth quarter. This was a decrease of 0.45 mb/d compared to the third quarter of 2012, due to lower Saudi Arabian production in November and December. The IEA estimates that world oil demand averaged 91.2 mb/d in the fourth quarter of 2012, which is an increase of 1.2mb/d compared to previous quarter and the IEA estimates that world oil demand averaged approximately 89.8 mb/d in 2012, representing an increase of 1.0 percent or 0.9 mb/d from 2011. 2013 demand is expected to be 90.5 mb/d".

Supply-wise, "the VLCC fleet totalled 622 vessels at the end of the fourth quarter of 2012, up from 617 vessels at the end of the previous quarter. 11 VLCCs were delivered during the quarter, six were removed. The order book counted 81 vessels at the end of the fourth quarter, down from 91 orders from the previous quarter. The current order book represents approximately 13 percent of the VLCC fleet. According to Fearnleys, the single hull fleet is 17 vessels, five less than last quarter" it concluded.

-- Source from Nikos Roussanoglou, Hellenic Shipping News Worldwide

Source from : CNSS

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