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Monday, December 11, 2017

VLCC fleet steady … AG arrivals down … spot fixing unchanged … firmer rates

Johan G Olsen (JGO) lists in its latest March VLCC Review a total of 512 VLCCs – actually down 8 in the six months since November 2007. But there is a still-growing VLCC orderbook which now totals 210 units (up 14).

 

80 of the VLCCs are fixed to 2009 and beyond (down 26), and 176 are oil company/state owned. This leaves 256 VLCCs in the spot market, according to JGO, three of which are being used for permanent storage.

 

 

We have recorded a number of VLCCs which have been sold for conversion in the period 2005-2008. Since 2001 we have recorded a total of 165 VLCCs that have been removed from the market (20 of these in 2007). Of these we have recorded 98 that have been sold for decommissioning - meaning that 67 have gone for conversion.

 

Year

No VLCCs* 1 Jan.

Increase

Deliveries**

Removals***

2001

438

-0.50%

27

29

2002

428

-2.28%

38

48

2003

433

1.17%

37

32

2004

451

4.16%

29

11

2005

474

5.10%

31

8

2006

486

2.53

21

9

2007

495

1.85%

29

20

2008

508

2.63%

38

25

2009

548

7.87%

65

25

2010

538

-1.82%

60

70

2011

590

9.67%

52

0

2012

594

 

4

0

Source: *Fearnleys Review **Source: Clarkson*** Calculated/projected

 

The large number of deliveries 2008-2010 may to a great extent be balanced by removals, mainly for conversion, in 2008-2009. There have even been reported a handful of double hull VLCCs going for conversion to offshore facilities.

 

Our scenario assumes that all single hull (SH) VLCCs will be removed by end 2010. It is in fact likely that some SH VLCCs will trade beyond 2010 until the age of 25 years old, the number depending on the market situation in 2010 and the number of VLCCs that have been sold for conversion in the meantime. The VLCCs being delivered are in general bigger than those that have been removed.

 

 

According to JGO, the eight Middle East tanker companies, with a total current fleet of 68 VLCCs, have the biggest VLCC orderbook comprising 35 orders, of which NITC has 11, VELA 9, Gulf Management Services 9, National Shipping Company of Saudi Arabia 6, and Saudi Maritime Holding Co. 2.

 

The six Chinese tanker companies, with a total existing fleet of 33 VLCCs, have the second biggest VLCC orderbook comprising 33 VLCCs, of which Nanjing Tankers has 11, China Shipping Group 8, China Merchants (Ming Wah) 9, and COSCO 5.

 

Thirteen Japanese tanker companies, with a total current fleet of some 8 VLCCs, have an orderbook of 24 VLCCs. Mitsui is the biggest with 8, NYK with 6 and CIDO with 5. Some 60% of the Japanese VLCC fleet is still fixed on period contracts, and others have other long term arrangements, but there appear to be an increasing number operating in the spot market.

 

We also note 19 Greek tanker owners with a combined fleet of 90 VLCCs and an orderbook of 25 units.

 

The major oil companies, ExxonMobil, BP, Shell, ChevronTexaco, have a VLCC fleet totalling 26 units and do NOT have any VLCCs on order. They have 26 VLCCs on long-term contracts until 2010 and beyond.

 

The four biggest VLCC owners in JGO's book are Mitsui with 36 VLCCs, NYK with 29, Frontline with 26 and Acol Tankers/Kristen Navigation with 23. Frontline has, in addition, some 6 VLCCs on period contract from Dr Peters to 2009 and beyond, and three from Knightsbridge, all of which trade in the Frontline pool. Four of the Shinyo International newbuildings are also fixed on commercial management to Frontline as from 2009/10.

 

The trading SH VLCC fleet is around 124 - but this figure is somewhat uncertain due to the significant number of sales for conversions with unconfirmed start dates. There are 21 SH VLCCs left which are 20 years or older, 94 SH VLCCs which are 15 years or older, and 30 SH VLCCs which are younger than 15 years. Two of the VLCCs listed are oil/ore carriers, and TMT has 9 oil/ore carriers on order.

 

The biggest owners of single hull tankers are:

 

 

SH

Remarks

VELA

15

 

Dynacom

7

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

Titan Ocean

9

(all but one of the VLCcs built in the 1980s)

World Tankers

8

+1 DB (O/O)

Tanker Pacific

8

+2 DS

TMT (Great Elephant)

6

(all to be converted to dry)

Frontline

6

+ 1 DS

Cido Shipping

6

(of which 1 to be converted to dry)

Bergesen World Wide

4

 

Shinyo International

4

 

Others

51

 

Total SH (including DS/B)*

124

 

* not including O/Os

 

 

 

 The current oil market is extremely tense with record oil prices and very tight supply. A low dollar and continued problems in some main production areas are stimulating speculation. VLCC fixtures have naturally correlated strongly with oil production in the Middle East. The table below shows that, despite the increasing number of VLCCs and the declining number of monthly AG VLCC fixtures in 2008, freight rates are still very 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. This year some of the fleet may also be tied up in storage by the Iranians.

 

 

 

 The graph above shows that since end July last year, the number of VLCCs arriving in AG over the next 30-day period is showing a declining rate, whereas the number of weekly fixtures is quite steady. Splitting the period in two (see table below), we also see that both the number of double hull and single hull VLCCs arriving the second period is lower that in the first period:

 

Average number of VLCCs arriving AG next 30-day period:

 

 

 

DH arriving

SH arriving

All VLCCs arriving

Average number of fixtures

26-Jul-07

06-Dec-07

41.3

38.8

77.2

27.8

06-Dec-07

08-May-07

38.7

34.5

73.2

27.3

 

This means that the situation in the spot market has become tighter, which is also reflected in much higher freight rates.

 

 

Year

Average monthly AG VLCC fixtures*

ME Oil prod mbd**

No. of VLCCs, 1 Jan***

Increase

$/day spot****

2001

82

20.9

438

-0.50%

32,852

2002

73

19.7

436

-0.46%

19,655

2003

90

21.1

426

-2.29%

52,209

2004

101

22.4

431

1.17%

91,872

2005

88

22.5

449

4.18%

60,627

2006

87

22.7

478

6.46%

63,073

2007

96

22.1

487

1.88%

57,147

1Q08

86

23.2

490

0.62%

92,709

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

 

Today some 16% of the VLCC fleet is fixed on contracts to 2010 and beyond, another 34% is owned by state/oil companies, which leaves about 50% 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 40 contracts were entered, and hit a low point in 2005 when 16 were made. We recorded 33 period contracts in 2006 and we have recorded 29 so far in 2007.

 

Recorded VLCC Period contracts

Year

Number

dwt

Average period

Average rate

1997

4

1,357,626

1.3

24,488

1998

12

3,356,368

1.9

20,091

1999

8

2,182,259

1.4

18,503

2000

28

7,660,911

1.6

27,029

2001

32

8,812,465

2.8

32,086

2002

40

11,164,695

2.3

22,689

2003

19

5,382,083

2.9

21,883

2004

31

8,691,306

4.0

36,454

2005

16

4,344,787

2.9

41,238

2006

33

9,772,538

4.3

36,097

2007

29

8,750,089

3.6

48,130

4m08

10

3,365,606

3.2

63,675

Total

262

74,840,733

3.6

32,835

 

 

 Contact: Erik Ranheim