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Ship Owners Fleet Expansion

Ship Owners Fleet Expansion
Tanker companies including General Maritime Corp. and Tsakos Energy Navigation Ltd. may expand their fleets after the recession sent ship costs to five-year lows last year.

Ship Owners Mull Fleet Expansion After Recession Cut Prices.

Tanker companies including General Maritime Corp. and Tsakos Energy Navigation Ltd. may expand their fleets after the recession sent ship costs to five-year lows last year. Prices for five-year-old very-large crude carriers, or VLCCs, dropped to $77.1 million on Dec. 14, the lowest level since March 2004, according to price assessments compiled by the London-based Baltic Exchange.

Tanker purchases may increase as the economy recovers from the worst slowdown since World War II. Oil demand will rise about 1.1 million barrels a day this year and 1.5 million in 2011, U.S. Energy Department data show.

?Ship values are low enough now that buying vessels can make sense,? said Jeffrey Pribor, chief financial officer of New York-based General Maritime. ?The key now is not as much waiting for lower values as picking the right time to buy. We have some hopes that timing could be 2010.?

Tsakos has $300 million on hand to purchase ships, said Paul Durham, the Athens-based company"s chief financial officer.

?Our primary objective this year is to acquire vessels,? Durham said in a telephone interview. The acquisition ?probably will be on the crude-tanker side, such as Suezmax and Aframax, but we will also look at product tankers.?

Cargo Limits

Tsakos Energy operates a fleet of 46 ships, according to the company"s Web site.

General Maritime"s 31-ship fleet includes Suezmax, Aframax and VLCC tankers. That"s down from 2004"s peak of 47 vessels, according to the company.
The VLCC price assessment was down 52 percent from the peak of $162 million reached in the week ended July 28, 2008. Prices were quoted at $79 million on Feb. 1.

The price of smaller Aframax tankers fell to $37.7 million on Nov 9, the lowest level since January 2004. Costs were down 51 percent from the peak of $77 million reached in September of 2008. The price rebounded to $39.9 million on Feb. 1.

VLCCs can carry more than 1.46 million barrels of crude oil, Suezmax tankers can carry 876,000 to 1.46 million barrels and Aframax ships can haul 547,500 to 876,000 barrels.

Teekay"s Outlook

Vancouver-based Teekay Corp., the world"s largest owner of oil tankers, said it has no immediate plans to acquire additional spot tanker vessels.

?We will, however, continue to monitor the markets and consider attractive investment opportunities, particularly assets with long-term, fixed-rate contracts,? said Teekay spokeswoman Alana Duffy in an e-mail. Teekay currently operates 158 vessels.

The recession also brought down the cost of new ships.

The price of new VLCCs fell to $95 million this month from $134 million at the end of 2008, according to Oslo-based RS Platou Markets AS. New Suezmax ships fell to $60 million each from $82 million at the end of 2008. New Aframax vessels declined to $51 million from $66 million.

About 18 percent of last year"s expected deliveries were postponed, according to Platou.

Tanker Rates

Tanker rates have recovered from their 2009 lows. The Baltic Dirty Tanker Index, which is derived from prices on 12 crude-oil tanker routes, stood at 1,018 yesterday after dropping 35 percent in 2009 to 814 on Dec. 24. The index averaged 581 last year, down 61 percent from 1,510 in 2008.

?The worst of the tanker cycle trough is now in the rearview mirror,? Jonathan Chappell, a New York-based analyst at JPMorgan Chase & Co., said in a report on Jan. 22. Chappell said he expects weak rates in the second and third quarters and a recovery in the last three months of the year. VLCC rates on the benchmark Arabian Gulf-to-Japan route stood at Worldscale 100.63 yesterday, equivalent to $62,765 a day after fuel costs. The rate was WS 58.91 at the end of December.

?Tanker rates will rise this year as the economy recovers, not dramatically, but at a better level than last year,? Durham said.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.


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