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Monday, December 18, 2017

The VLCC fleet and market

Altogether Johan G. Olsen (JGO) in its VLCC review lists 498 VLCCs, together with an orderbook of 193 VLCCS. The single hull (SH) VLCC fleet is now 152 units (30%). There are 19 VLCCs listed of 20 years or older and 94 VLCCs 15 years or older. Two of the VLCCs listed are oil/ore carriers.

 

Some 99 of the VLCCs are fixed to 2009 and beyond. 175 are oil company/state owned.  This leaves 220 VLCCs in the spot market.  Five of the VLCCs listed by JGO are old tankers used for permanent storage that will never trade again.

Four VLCCs have been sold for conversion so far in 2007 - two have been sold for conversion to VLOCs, one to be a FPSO and one is reported to be converted to double hull.  None have been sold for decommissioning. When looking at the number of VLCCs 1 January 2001 and every year thereafter, over 150 VLCCs will have been removed from the market by January 2009.

 

Year

No VLCCs* 1 Jan.

Increase

Deliveries**

Removals***

2001

438

-0.5%

27

29

2002

436

-2.3%

38

48

2003

426

1.2%

37

32

2004

431

4.2%

29

11

2005

449

5.1%

31

8

2006

472

2.5%

21

9

2007

484

5.2%

31

6

2008

509

6.5%

43

10

2009

542

11.1%

70

15

2010

597

 

 

 

Total

 

 

327

155

*Source: Fearnleys Review **Source: LRF/JGO ***Calculated/projected

The phase-out according to MARPOL 2007-09 totals 5 VLCCs

 

The large number of deliveries 2007-2009 will most likely create a surplus of VLCCs.  This surplus may disappear in 2010 if all SH VLCCs are phased out. This is unlikely because many of them will be quite young and there will be niches were they can trade until the age of 25 years old or maximum 2015.

 

However, if we assume that all SH VLCCs are taken out of the market by 2010, and if we assume a balanced market end 2006 and a 4.5% increase in demand annually, then another 33 VLCCs are needed by 2010 to balance the market. Assuming this increase in demand is only 3.5%  then another 11 VLCCs are needed; assuming only 3% increase, then no new deliveries are needed before 2011. (We have taken into account that the new VLCCs are larger than the old ones they replace.)

 

According to Johan G. Olsen, six Middle East companies with a total current fleet of some 60 VLCCs have the biggest VLCC orderbook (35 orders): NITC 13 VLCCs, National Shipping Company of Saudi Arabia 7 VLCCs, Gulf Management Services 6, VELA 6, Saudi Maritime Holding Co. 2 and KOTC one VLCC on order.

 

There are eight Chinese companies with a total existing fleet of some 23 VLCCs that have the second biggest VLCC orderbook of 31 VLCCs - COSCO 10, Nanjing 9, China Shipping Group 9, China merchants (Ming Wah) 2 and Sinotrans one.

 

Fourteen Japanese companies with a total current fleet of some 108 VLCCs have an orderbook of 31 VLCCs; Mitsui and NYK have the biggest with 10 and 8 VLCCs on order respectively.  The Japanese VLCC fleet is still mainly on period contracts but there appear to be an increasing number also operating in the spot market.

 

We note 17 Greek owners with a fleet of 85 VLCCs and an orderbook of 14 units.

 

The major oil companies: BP, Shell, Chevron have a VLCC fleet totalling 26 units and do NOT have any VLCCs on order, but they have 35 units on long-term contracts until 2009 and beyond.

 

The four biggest VLCC owners in Johan G. Olsen’s book are Mitsui (35 VLCCs), NYK (30 VLCCs) Frontline 27 VLCCs and BergensenWorldWide 20 VLCCs.  Frontline has in addition some 8 VLCCs on period contracts to 2009 and beyond, including 5 from Dr. Peters on 10/13 year contracts. Four of the Fred Cheng/Shinyo International VLCCs are also fixed on commercial management to Frontline as from 2009/10.

 

The biggest owners of single hull tankers are:

 

VELA

15 SH

Dynacom (George Procopiou)

11 SH (of which 2 sold for FPSO conversion)+ 1 DS

Titan Ocean (

10 SH

Frontline

7 SH+1 DS

World Tankers (Haji-Ioannou)

7 SH+1 DB (OO)

Bergesen World Wide

7 SH

TMT

6 SH

Cido Shipping

6 SH

Tanker Pacific

5 SH

Shinyo International (Fred Cheng)

5 SH

NYK

5 SH

Kristen Navigation

5 SH

Hyundai Merchant Marine

4 SH

Mitsui

4 SH

KOTC

4 SH

Embricos

4 SH

Metrostar

3 SH

Hebei Ocean

3 SH

Sinotrans

3 SH

China Merchants

3 SH+1 DS

ExxonMobil

2 SH+1 DB (latter used for storage)

Others

30 SH

Total SH (including DS)

152

 

Average freight rates are at a lower level than last year but still relatively strong. VLCC fixtures have naturally correlated strongly with the oil production in the Middle East. The table shows that despite the increasing number of VLCCs, and the steady number of monthly AG VLCC fixtures over the last three years, the freight rates are still strong. As we have noted before, the tightness in the market also depends on the productivity of the fleet. In 2006 VLCC productivity was reduced  due to VLCCs being used for floating storage,waiting time for SH VLCCs, slow steaming SH VLCCs and increased time in drydock due to yard capacity problems.

 

Year

Monthly AG VLCC fixtures*

ME Oil prod mbd**

No. of VLCCs, 1 Jan

Increase

$/day spot***

2001

82

20.9

438

-0.5%

32,852

2002

73

19.7

436

-2.3%

19,655

2003

90

21.1

426

1.2%

52,209

2004

101

22.4

431

4.2%

91,872

2005

88

22.5

449

5.1%

60,627

2006

87

22.8

472

2.5%

63,073

2007

105

22.5

484

5.2%

56,288

Source: *Clarkson, ** IEA Middle East oil production, ***Fearnleys Review, **** Clarkson 

 

Some 45% of the VLCC fleet is in the spot market, compared to 58% in 2000/2001.  The number of period contracts of one year and above peaked in 2002 when some 50 contracts were entered into; compared to that,  15 were made in 2005, 33 in 2006 and we have recorded 14 so far in 2007.

 

 

Contact: Erik Ranheim