Home / Shipping News / Hellenic Shipping News / VLCC Still the Main Demolition Candidates

VLCC Still the Main Demolition Candidates

The ships’ demolition market has been dominated by wet tonnage so far in 2018, with the past week proving no exception to the norm set since the beginning of the year. In its latest weekly report, Clarkson Platou Hellas siad that “last week had seen some firmer prices return to the market with once again VLCC’s being the main tonnage being offered by Owners whilst the Tanker market continues to remain in a depressed state. As cash buyers look to have offloaded the bulk of their larger wet tonnage previously acquired into the ‘now-open’ Pakistan market, it has meant a small sense of cautious appetite has returned resulting in some stronger numbers being offered on the subsequent VL’s that entered the market. However this sense of positivity is not viewed across the board as each individual buyer still has its own ideas on the market with some preferring prompt tonnage before the upcoming Ramadan and Monsoons, whereas others seem to have preferred the gamble on a longer laycan, leaving it difficult to gauge whether prompt or longer deliveries are more beneficial to buyers. With Ramadan now upon us, we may see a cooling off period taking shape over the next few weeks and therefore Owners may hereafter find it harder to attract even an offer for any available tonnage”.

In a separate note, Allied Shipbroking added that “things in the recycling market turned rather blurry for the time being, given the fact that activity in the Indian Sub-Continent is unable to sustain its previous fixing volumes. Despite Pakistan’s re-opening for tanker units, offered price levels remain under pressure, as inventory circulated into the market is excessive and most End Buyers seem discouraged to bid at these levels. Moreover, given that we are now close to a traditionally quiet period for the demolition market, and with weather disruptions already being felt to some degree, this may have spooked most cash buyers from any excessive speculative buying while also looking to take a more conservative approach, holding back their cash for when the uncertainty seems to have cleared up. Regarding the other main ship recycling destinations, recent news of the closure of the Chinese recycling market for international flagged vessels, came to add extra pressure to the mix, despite the fact that China has been unable to compete in this market for some time now. On the short run, given that the closure is planned to take effect from January 2019 onwards, it is unlikely that this will play an imminent role in the overall price of scrap”, the shipbroker noted.

According to the world’s leading cash buyer, GMS, “following the official reopening of the Pakistani market for tankers, the offloading of the plethora of unsold tanker / VLCC tonnage continued at pace this week, as interested Pakistani Buyers eagerly filled their plots. There were further VLCC sales concluded this week, gradually bringing the total number of units sold through 2018 towards the 30 mark, which looks likely to hit even before the end of May (not even halfway through the year)! There is a noteworthy dissimilarity in pricing a VLCC vs. an MR / Aframax / Suezmax tanker as very few end Buyers in the Indian sub-continent are capable of opening such large U.S. Dollar value Letters of Credit (LC). Under the current market conditions, this can easily amount to an approximately USD 18 million LC on a roughly 40,000 Lightweight unit. Given the limited number of capable end Buyers who are able to do this (translating into a lower demand), VLCCs are discounted far more than the average tanker for which, a greater number of Buyers are open / available to negotiate.

Moreover, VLs generally take between 6 – 8 months to fully recycle, resulting in a significant exposure for the respective Buyer who will likely endure multiple market peaks & troughs over this period and only a Recycler with a strong financial standing is generally willing / able to withstand such fluctuations. Pakistan and Bangladesh – both of whom have already reached their saturation points – tend to be the main Buyers for such large LDT tonnage, whilst India prefers smaller sized vessels that they can quickly recycle and minimize their market exposure (due to the generally volatile nature of steel plate prices & currency fluctuations) before moving onto the next unit. Finally, for those owners who choose to sell their large LDT ships into India for HK SoC green recycling (such as Ridgebury Tankers this week), there is generally another hefty discount to endure (about USD 500,000 in this case) as compared to conventional recycling. GMS APPLAUDS their decision for choosing responsive recycling standards over price”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

Leave a Reply

Your email address will not be published. Required fields are marked *

*

captcha

Please enter the CAPTCHA text

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping