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Tuesday, December 12, 2017

Phase out confusion continues in marketplace over 2010 or 2015 drop-dead date for single hulls

In the last weekly we announced that new information showed that there were only a handful of pre-MARPOL non-SBT tankers left above 70,000 dwt.  We asked readers to check their ships according to an attached list of SH tankers above 70,000 dwt, and we received only one comment on a sale and name change.

The reason why we keep on repeating this story, is that there has been great confusion in the market with regard to the phase out requirements, and some very high figures are being mentioned. Such information confuses the market. For instance, we see in a new market report (Sailing on the Seven Seas) by Citigroup/Smith Barney that projects that sales for decommissioning will hit 10.9m dwt this year, 19.3m next year and another 31.3m dwt 2006-2008.

M dwt

2004E

2005P

2006P

2007P

2008P

Mandatory

7.3

16.5

2.2

5.4

3.7

Voluntary

3.6

2.8

4.0

6.0

10.0

Total

10.9

19.3

6.2

11.4

13.7

The total sales for decommissioning projected by Citibank assume that in addition to the 35 m dwt they say are required absolutely by MARPOL 13G to be phased out by end 2008 another 26.4 m dwt of tankers will be sold for decommissioning by end 2008 at the age of 24 and younger. The INTERTANKO figures show that 26.7 m dwt are required to be phased out by 2008, of which 2.1 m dwt should have already gone in 2003 and, therefore, is probably trading in segments not subject to MARPOL phase out requirements.

Single hull tankers may trade 2010-2015 until they are 25 years old, if permitted by flag and port administrations. Singapore has recently become the first country outside Europe to declare its position on single hull phase-out by allowing Singapore-flagged single hulls to operate up to 25 years or 2015 whichever is earlier. This initiative, which is contrary to Europe’s decision to ban single hulls from 2010, could cause other flag states to follow suit.

The average age of tankers sold for decommissioning so far this year is 26.4 years (ranging from 18 to 46 years old) and we have recorded altogether 36 tankers of 24 years and younger sold for decommissioning this year so far:

Age

Small

20,000 - 69,999

+70,000 dwt

Total

18

 

 

1

1

20

 

1

1

2

21

2

 

1

3

22

2

2

3

7

23

5

8

2

15

24

 

4

4

8

Total

9

15

12

36

We have now incorporated all changes into our complete list of SH tankers (including tankers with DS or DB). The below table below shows that the phase-out requirements in the years ahead are actually rather moderate.

Even these phase-out figures are still not quite clear or final. The tankers that should have been phased out in 2003 are most probably operating in segments not subject to MARPOL phase-out requirements, i.e. as storage, in non-petroleum trades for example vegoils, or in countries not signatory to MARPOL.  The U.S. OPA 90 has a different phase-out schedule to MARPOL which allows longer trading life for small tankers. 

As several tankers above 70,000 dwt appear to have been converted to PL/SBT, it is likely that there are tankers below this size limit that have also converted to PL/SBT that are included in our records as non-SBT tankers. PL/SBT tankers, or MARPOL-compliant Category 2 tankers built after 1977, are given a couple of years more trading life than non-SBT/PL or Category 1 tankers.

But as we said in our article in  Weekly News 36,  the reality is that the phase-out requirements are likely to have virtually no market impact before 2010. The phase-out that year will depend on whether administrations will allow SH tankers to trade until they are 25 years old, with DB/DS tankers able to trade after 2010 until they are 25 years old.

Contact: Erik Ranheim