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Grim news for tanker owners, single hull vessels look set to vanish from the market |
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Saturday, 11 April 2009 |
 In a weak freight market, like the one shaping up in the tanker sector during the first months of 2009, the “weak” seem set to be eliminated, as is the case for single hull tankers. According to the latest weekly report from Gibson, “we are very close to the end for the single hull tanker. Age and preference have already steered many charterers away from single hulls, but over the recent boom years there have not been enough double hulls for everyone and so the singles have been needed. However
the problem now is that this position is changing rapidly. The drop in
world oil demand and the OPEC response to cut crude production to
support prices has meant demand for crude and product tankers has
fallen sharply over the past 3 months”.
Further to that, the latest
news regarding world oil demand and production verified the already
weak trends set in motion for tanker owners. According to Friday’s IEA
reports, the agency expects producers outside the Organization of the
Petroleum Exporting Countries to pump about 50.3 million barrels per
day (bpd) in 2009, down 300,000 bpd from 2008. The IEA also said that
spending cuts in response to lower oil prices could reduce non-OPEC
supply by a further 360,000 bpd by the end of 2010, mainly from mature
producing regions such as the North Sea, United States and Mexico. The
agency also cut its 2009 demand forecasts by another one million
barrels per day, bringing total revisions for the year to three million
bpd. This leaves total demand for 2009 forecast at 83.4 million bpd,
some 2.4 million bpd less than in 2008 and the lowest level since 2004.
Meanwhile,
the 12 members of the Organization of the Petroleum Exporting Countries
(OPEC) pumped an average 27.98 million barrels per day (b/d) in March,
as the oil producer group continued its efforts to slash oversupply and
prevent oil prices falling further, according to a Platts survey of
OPEC, oil industry officials and analysts just released. This is down
90,000 b/d down from February's 28.07 million b/d.
As a result, the
general level of spot charter earnings have dropped to their lowest
levels for several years and in many cases even below operating costs.
So, as Gibson notes, “if this is the case for modern, double hull
tankers then the singles trading on the spot market can only expect to
be operating at a discount to these already dire market conditions.
With no immediate signs of a pick up in demand and a lot more new
tankers to be delivered, the next 1-2 years could be a challenge to
owners of double hull tankers; this and the IMO 2010 phase-out, means
the position for owners of single hull spot tonnage may be impossible”.
In terms of numbers, there are currently 595 single hull and 3092 double hull tankers
above 25,000 dwt. The singles therefore represent some 16% of the fleet, with the
proportion
in the VLCC market even higher at 21%. The broker notes that it seems
the time will soon come that it no longer makes economic sense to
continue to trade the single hull fleet on the spot market. Fixing at
below operating costs and spending more time off hire can only be
sustained for a short period before the decision to get rid of the
vessel is finalized. With lay-up not a realistic option and no real
other alternatives, scrapping will be the only way out for the majority
of owners.
Nikos Roussanoglou, Hellenic Shipping News
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