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Tanker demolition activity reaches 9.5 million dwt in 2011, much lower than year before

Monday, 16 January 2012 | 00:00
Despite the severe oversupply problems in the tanker market during these past 12 months, tanker owners didn't appear to take the same road as their counterparts in the dry bulk sector, as scrapping of older vessels reached a total of 9.5 million dwt during 2011, said London-based shipbroker Gibson in its latest weekly report. According to Gibson, this figure was 2.6 million dwt less than the volume achieved during 2010.
"Although the bulk of the single hull tankers have already been removed from the fleet, 49 units amounting to 4.6 million dwt were scrapped, ‘mopping up’ more of the remaining tankers (including 8 VLCCs). However, more importantly, we have seen an increasing amount of double hull tonnage going for scrap. Given the poor trading conditions experienced by some markets during the year, particularly for the crude tankers, it is perhaps surprising that more sales were not concluded given that lightweight prices remained fairly firm throughout 2011. However, as asset values fell and bunker prices spiralled higher, we began to see more sales of first generation double hull tankers and witnessed the sale of the first double hull VLCC for demolition. Our Tanker Report (16th December) cited recent sales of double hull VLCC tonnage for recycling, generating returns of around $20 million, at the same time as the second-hand price for a 15 year old has fallen to around $24 million. One such sale was the 1998 built RION ex Orion Trader (267,736 dwt), which has the distinction of being the youngest tanker sold for demolition at a mere 13.9 years of age, although the actual sale price was not reported" said Gibson.
It went to say that "looking back at last year’s statistics, 12 VLCCs (average age 22 years) were sold for demolition, with half of the sales concluded since late September. The largest tanker being the TIAN SAN (357,128 dwt) when sold to Bangladeshi breakers in February. Amongst the oldest units sold for demolition were 4 US flagged Jones Act MRs, totalling more than 190 years service between them. There were 8 Suezmax sales, while Aframaxes accounted for a further 27 (average age 20.6 years), with 7 Panamax and 55 MRs also removed.
The biggest talking point throughout the year has been the absence of Bangladesh from the market for much of the year. Bangladesh has in the past been the traditional destination for tanker demolition and has taken no deliveries of any tonnage (wet or dry) since the beginning of November. Other factors affecting the demolition market, particularly in India, has been the devaluation of local currency against the US dollar, which has had an impact on buyers being able to obtain credit. However, lightweight prices remain relatively firm and this plus a cocktail of factors could prompt more sales activity over the next few months should owners continue to be squeezed by poor margins, as well as increasing legislation" concluded Gibson.
Meanwhile, in the tanker market this week, Barry Rogliano Salles (BRS) said that "while the Iranian threats against traffic in the strait of Hormuz make the headlines, demand for VLCC tonnage from the Middle East Gulf was again maintained these last few days at a high pace, and owners are starting the year with high morale and have already managed to push rates slightly upwards. "Although bunkers are still increasingly expensive, on the basis of lowered speeds at about 13 knots daily returns for voyages to the East are now hovering above USD15,000, with a good potential for improvement. Similarly, the few fixtures concluded to the West have increased to the low/mid WS30s on the new Worldscale which finally corresponds to a slightly positive return. In addition, a more and more bullish attitude from
owners on cargoes from the western hemisphere is being felt. As an example, WAfr to the USG is worth a bit more than WS60 and high WS50s (new scale) to the Far East which equates to healthy returns above USD30,000/day. This obviously keeps attracting ships
ballasting from the east" said the Paris-based shipbroker.
In the Suezmax front, it said that "2012 is also starting on a much better tone than Suezmax owners averaged last year. Demand in the western hemisphere is extremely busy with a good equilibrium between the various loading zones. One also notes a much more regular volume for longer hauls to the East with an obvious impact on tonnage availability. A shorter tonnage list in West Africa versus high and stable demand has quickly and strongly pushed rates up. The week ended at about WS95/97.5 for USAC/UKC respectively (+12.5 pts) which (basis 13
kts) equates to daily returns above USD30,000, a figure well above last year’s average! Will the market sustain such rates or will that remain a winter dream? Black Sea and Med movements remain strongly influenced by the delays in the Turkish straits (min 12 days
northbound). With rates from Novorossiysk well maintained around WS100, returns are also above USD30,000 per day. At least for the next 10 days we can forecast maintenance of this favorable market for owners" mentioned BRS.
Finally, "on the Aframax front, the north markets softened further this week. With limited activity on cross-North Sea and ample ice tonnage available for Baltic enquiries, rates came down to WS100 on 80,000t cross-Cont and WS85 basis 100,000t ex Baltic (daily returns around USD15,000). Market could get tighter on the ice class front end Jan/early Feb. There was not a great deal of activity in the Med and Black Sea sectors. As expected and due to a reduced demand, most cargoes were fixed around WS100 for cross-Med (below USD15,000/day). Only spot stems or replacements due to bad weather saw higher rates, but the natural forward fixing feels flat or even slightly softer. In comparison, the other zones such as Caribbean or the Middle East Gulf appear pretty quiet with stable weak rates and daily returns hardly fetching USD5,000" concluded BRS.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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