Frontline Ltd. believes that the current slump in freight rates will push tanker owners to ?massive? cancellations and scrapping.
Frontline Ltd. believes that the current slump in freight rates will push tanker owners to ?massive? cancellations and scrapping.
According to the Baltic Exchange, VLCCs are at present only making $4,335 per day per vessel on MEG-East and MEG-West routes after subtracting bunker costs.
Average cash break-even earnings for the VLCC spot market is below $25,000 per day per vessel, but break-even rates are calculated differently across the industry, with some companies like Frontline Ltd. reporting its break-even rate as high as $34,700 per VLCC.
?We will see scrapping happening soon, then we will see massive cancellations in the order book,? Frontline CEO Jens Martin Jensen told.
Meanwhile, the president of a shipping company told that at least 47 tanker newbuilding orders have been cancelled so far this year.
According to Ragnar Nielsen of Singapore-based Masterbulk, some 434 newbuilding orders have been cancelled, including 298 bulk carriers and 74 box ships.
Nielsen told that in spite of the tanker cancellations, the number of bulk carrier newbuildings cancelled ?reflects sentiment that the tanker markets will be more stable than the dry bulk segments going forward.?
These numbers and Jensen's forecast of 'massive' cancellations are sure to be welcomed by the industry, which has been shadowed by tonnage over-supply on the back of OPEC supply cuts and bearish global oil demand forecasts in recent months.
Tanker markets and the VLCC spot market in particular, continues to weaken on little activity.
Activity levels are low primarily because cargo requirements are not increasing.
Many are blaming reduced oil output from OPEC.
The cancellation of 47 tanker newbuilding orders so far this year would definitely help alleviate problems of tonnage over-supply.
Louisa Follis, a general manager with Simpson Spence & Young Research, had said in September that the 'credit crunch' that has forced banks to tighten financing of vessel purchases benefits tanker owners.
According to her, ?credit drying up is good news for owners in the long run.?
?It reduces the fleet order-book? at a time when an over supply of tonnage threatens the market, she added.
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