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Opinions divided over tankers

Opinions divided over tankers
INDUSTRY division has emerged over the state of the tanker orderbook and the fate of single-hull tankers in 2010.

Opinions divided over 2010 tanker fleet supply
Differing views over newbuild delays and single-hull phase-outs.

INDUSTRY division has emerged over the state of the tanker orderbook and the fate of single-hull tankers in 2010.

There are differing opinions over how many newbuilding tankers on order at shipyards will be cancelled or delayed in 2010, as well as the number of single-hulled tankers that will be phased out.

Both factors will determine global fleet supply across the recovering tanker sector and have a crucial impact on rates recovery, especially for very large crude carriers.

Morten Arntzen, the chief executive of New York-listed OSG, which has a fleet of 110 vessels, told a conference call this week that the Grim Reaper had arrived for the single-hull tanker in 2010.

?He will finish up his job in 2010, and we"ll have a better market as a result of it,? Mr Arntzen said.

The world"s largest listed VLCC operator, Frontline, estimated during its recent conference call that 60 of the remaining 84 single-hull VLCCs would be phased out in 2010, or disappear from regular trading.

Under International Maritime Organization regulations single-hull tankers will be phased out in 2010, but port state and flag state exemptions can allow trading until 2015 or until the vessel is 25 years old. Single-hull tankers comprise about 51m dwt of the global fleet of 388m dwt.

But despite industry hopes of a faster phase-out to help slow fleet growth, researchers believe this might not be the case. A report by DVB Bank last month estimated that only 40 of the remaining 98 non-double hulled very large crude carriers would be scrapped in 2010.

Clarkson Research Services" Martin Stopford also said last week that current scrapping levels for single-hull tankers meant that only 15m dwt of the 51m dwt fleet would be removed in 2010. Four VLCCs have been scrapped so far in 2010. But OSG"s Mr Arntzen said single-hull vessels were waiting longer for work and dropping rates to take cargo, and would be ?irrelevant by the end of the year?.

?The reality is the commercial marketplace does not want the single-hulls,? he said. South Korea, Japan and China, Thailand and the Phillippines ? all major destinations for single-hull VLCCs ? had either banned or were planning to ban them.

Also open to debate are cancellation rates and delays.

Frontline estimated that about 20% of tankers across the crude sector would be delayed in 2010, which would see only 53 of the 67 VLCCs scheduled for 2010 actually be delivered.

Slippage rates for VLCCs were 20% in 2009, with 54 delivered, and 37% for suezmax tankers, with 46 delivered.

Plummeting newbuilding prices would also result in deferrals, cancellations and delays in 2010, Frontline Management chief executive Jens Martin Jensen told the investor conference call last week.

He said this would see negative fleet growth for the global tanker fleet of VLCCs and suezmaxes. One-third of of the estimated suezmaxes were being built at greenfield yards, he said.

OSG believed there would be less money available to finance newbuildings and the level of cancellations, conversion to options and deferrals would be surprisingly higher than expected.

?There is no clearcut answer to that (slippage rates) because the whole area remains grey, because there"s not adequate disclosure from the yards or the companies as to what"s going on,? said Mr Arntzen.

?You are having some owners waiting until the last minute and then just not collecting their ships as they"re delivered from the yards, and there"s a couple of VLCCs that have now fallen into that category.?

He said OSG considered multiple orders cancelled if owners have already failed to take delivery of the first two ships because of lack of finance. ?It"s a lot messier out there than you think. There"s a lot more negotiations going on, and there"s going to be a lot more order book destruction to come.?

McQuilling Services, a New York-based tanker consultancy, forecast earlier this year that just 5%-6% of all tankers under construction were expected to be delayed. Only 1.2% were at risk of cancellation. Based on McQuilling-adjusted estimates, there are 899 product and crude tankers about 27,500 dwt on order, with more than 327 scheduled for delivery in 2010.

www.turkishmaritime.com.tr

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