Vintage converted VLOCs still make economic sense: BIMCO

Vintage converted VLOCs still make economic sense: BIMCO

With an average age of 23.8 years, the fleet of very large ore carriers (VLOCs) converted from very large crude carriers (VLCCs) are vintage compared to similar ships. The average age for a non- converted ore carrier above 200,000 dwt is 5.7 years in comparison. However, a leading analyst says there is little economic rationale to scrap them just yet.

BIMCO’s chief shipping analyst Peter Sand commented: “There are few acute purely economic incentives to demolish VLOCs converted from VLCCs despite the comparable high age. Some of the reasons being: still running on time charter contracts and identical prices for demolition and secondhand sale.”

Sand’s report out today comes two and a half months since the sinking of the Polaris Shipping converted ore carrier Stellar Daisy in the South Atlantic with the loss of 22 lives. Since that sinking a number of other defects have been reported on other converted ore carriers belonging to Polaris leading to speculation that Brazilian miner Vale might be in the process of changing its stance on the use of these old converted ships. Sand however observed that most of the converted VLOCs are operating profitably on fixed routes and schedules under long-term time charter contracts fixed a long time ago.

The converted VLOC fleet could carry 26% of the Brazil – China iron ore trade, according to BIMCO date. 24% of the total VLOC fleet is converted from VLCCs.

Sand pointed out that 32 new valemax ships are being built and scheduled for delivery in 2018-2019.
“At that time, many of the converted VLOCs may still be actively trading,” Sand noted, adding: “Thus, we do not expect the delivery of the valemax ships into the active fleet to be neutralized by immediate or simultaneous demolition of the converted VLOC fleet.”

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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4 Comments

  1. Avatar
    Andrew Craig-Bennett
    June 9, 2017 at 10:52 am

    It is important that people understand this. There is no incentive whatsoever for either the owners or the charterer to terminate the time charters.

    This may be a good moment to remember why the defective steering gear of the AMOCO CADIZ was not modified, when the steering gear of two of her sisters was… she was on time charter to Shell, at an above market rate, and Amoco did not want to incur the off hire..

    In the case of a ship with a couple of years to go before her fifth special survey, with the expectation that she will be replaced and scrapped shortly before that date, we can be sure that any superintendent will not hesitate to pull her out of service to fix something, and my favourite part of roast sucking pig is the wing..

  2. Avatar
    Manjit handa
    June 9, 2017 at 9:00 pm

    “Everyone is naked in this bathhouse” A Turkish proverb that explains the current state of institutionalised cowardice in the shipping industry. If only one element such as Insurance, P&I, PSC or Flag States could grow some spine, a reform is possible. If the powerful in this industry only think in terms of economics without any consideration for human life, they can manage even higher profits.
    Whatever happened to risk management on the principle of ALARP or Zero Harm?

    1. Avatar
      Andrew Craig-Bennett
      June 10, 2017 at 12:48 pm

      Institutionalised cowardice is exactly what we have, and the rot starts from the head with the useless IMO that we have today.

      I am minded to reach for my copy of Samuel Plimsoll’s “Our Seamen – An Appeal”.

      The separation of ownership from manning in today’s industry has led us back to the point that Samuel Plimsoll started from.

      1. Avatar
        Manjit handa
        June 10, 2017 at 2:35 pm

        Samuel Plimsoll remains the last man who stood upto opposition from all and sundry in his single-minded pursuit of safety. And he didn’t rest till he haf achieved his aim. Alas there is none so possessed of purpose today in any discipline of life.