Astounding volumes of VLCCs being scrapped still not enough to offset incoming deluge of newbuilds

The number of older VLCCs sent for scrap so far this year has been “somewhat astounding”, Clarkson Research states in its latest weekly report.

Fellow broker Gibson reports that 15 VLCCs have been reported sold for demolition in 2018, with this year’s volume already exceeding the total for 2017. In addition, two former VLCCs (converted into FSOs and used for storage projects) were also sold for permanent removal.

Tankers heading for scrapping are getting younger, relative to those demolished last year, according to Gibson data. This year’s average age is 18.5 years versus 21.5 years for VLCCs demolished in 2017.

The sheer volume of these giant tankers heading to the beaches of the Indian Sub Continent has created some logistical and financial bottlenecks.

“Cash buyers are starting to feel the strain of the continued availability of these larger units, with it becoming harder to sell to buyers at the ‘last concluded’ sale price,” Clarkson reported, adding that since these deals are high figure deals there is pressure on financing.

With prices reported of up to 460 per ldt in the past week, owners have been able to get close to a $20m pay cheque for their scrapped VLCCs.

However, both Indian and Bangladeshi banks are starting to introduce some limitations or restrictions in relation to their financing capabilities, which will add further pressure to the market.

While Gibson is predicting more elderly VLCCs will be scrapped in the coming months it will not be enough to offset the 46 VLCCs still scheduled for delivery this year, even taking slippage into account.

Brokers at Affinity concurred in its most recent tanker report, stating more VLCCs will need to be recycled to truly generate a recovery.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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