The Number Of Shipbreaking Surges! VLCC Market Oversupply

- Apr 08, 2018-

As OPEC and non-OPEC countries cut their oil production, the VLCC in the oil tanker market continues to face an oversupply situation, and VLCC's daily income has fallen sharply, pushing shipowners to abandon more VLCCs. Up to now, the number of dismantling VLCCs in 2018 has exceeded the total amount of VLCC dismantling in the past two years. This situation also shows that VLCC shipowners are facing a severe market environment.

 

According to industry sources, scrap prices have risen due to weak cargo prices, and 18 VLCCs have been dismantled so far in 2018. However, only 10 VLCCs were dismantled in the 2017 ship recycling market, and only two VLCCs were dismantled in 2016. glenflange

 

Analysts pointed out that this trend is not surprising because VLCC is facing very low daily gains in the spot market. Currently, the transaction level of the VLCC market is extremely low. For VLCC shipowners with a ship age of more than 20 years, the current market economy is not very favorable due to the higher cost of old VLCCs compared to more modern ships. 90 deg elbow lr

 

According to sources, due to the high cost of ship recycling, the dismantling transactions of old VLCC ships are more attractive to ship owners, especially if this old VLCC requires special inspections or may require maintenance.

 

Shipbroking company Gibson said in a recent report that due to the decline in freight rates, older ships have higher fuel consumption and longer waiting times between voyages than modernized and energy-efficient ships, putting greater pressure on their profitability returns. . As the spot market outlook is still poor in the short term, it is expected that there will be more capacity dismantling in the future.reducer elbow

 

At the same time, the VLCC ship dismantling activities also showed rapid growth of the VLCC fleet. Currently, there are still 17 orders for new VLCC ships on the new shipbuilding market, which is almost the same as the number of shipbreakers. Therefore, the effect of shipbreaking activities may be weakened.

 

In the past two years, the VLCC fleet has achieved amazing growth, with orders accounting for 15% of the current fleet. In the case of excess supply of crude oil vessels, the decline in crude oil inventories does not augur well for tanker shipowners. According to Affinity Tankers, a ship brokerage company, there are currently 23 VLCCs in the VLCC market that are over 20 years old, and the number of VLCCs over 18 years old is 42. If the freight rates continue to weaken, these older ships will become the main candidates for dismantling.