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VLCCs to be fixed on spot market

VLCCs to be fixed on spot market
Owners are offering their newly delivered VLCCs to be fixed on the spot market at a discount to prevailing rates.

Owners are offering their newly delivered VLCCs to be fixed on the spot market at a discount to prevailing rates.

Analysts at Drewry Shipping Consultants are suggesting that owners are offering their newly delivered VLCCs to be fixed on the spot market at a discount to prevailing rates.

They also said that may exacerbate the current slump in rates for global VLCC spot voyages.

?There have been some discounts given by owners of newbuildings,? a broker told.

The broker added that ?another month or two and people will start realising there is no sense taking these cargoes at this price.?

Two brokers spoke to Friday agreed that over the last few weeks some crude tanker voyages have been fixed at 'surprising' discounts to last done rate levels as owners were 'desperate' not to idle their new tankers.

But they added that the volumes of these type of deals may not be significant enough to detract the market from the fact that owners are already not breaking even at prevailing rates by a large margin.

?After a certain period of time owners will put their foot down, and let the ones who want to 'undercut' rates fix their own losses,? said one broker.

?The real factor influencing the markets now is a lack of cargoes versus the number of tankers available,? he added.

The global VLCC fleet will expand by 11% this year, adding even more downward pressure to rates.

Frontline Ltd. however, believes that the current slump in freight rates will push tanker owners to ?massive? cancellations and scrapping.

?We will see scrapping happening soon, then we will see massive cancellations in the order book,? Frontline CEO Jens Martin Jensen told.

The president of a shipping company told last month 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.

These numbers and Jensen's forecast of 'massive' cancellations are sure to be welcomed by the industry, which has been plagued by tonnage over-supply on the back of OPEC supply cuts and bearish global oil demand forecasts in recent months.

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, 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? as it "reduces the fleet order-book" at a time when an oversupply of tonnage threatens the market.

www.TurkishMaritime.com.tr

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