In stern contrast to the dry bulk market, where scrapping of older vessels is close to all-time highs and could be even higher, if it weren’t for low offer prices by demolition yards, the tanker industry was in a totally different state of mind during 2015. In fact, as shipbroker Gibson said in its latest report, demolition activity in the tanker market reached its lowest level in 25 years!

 According to Gibson, “in deadweight terms tonnage sold for scrapping amounted to 1.7 million tonnes, just 29 units. Robust earnings across most tanker sectors over the year discouraged scrapping, Also, the phase out of single hull tanker tonnage, with most of the replacement taking place between 2003 and 2010, meant that more than half of the current global tanker fleet is less than 10 years of age. There are very few tankers over 25 years of age, with more than 80% of the existing fleet less than 15 years of age”.

 The shipbroker noted that “scrap prices collapsed in 2014 and current lightweight prices for Pakistan are presently in the region of $300/ldt, around $200 less than in September that year. Pakistan breakers took more than half the tanker tonnage sold last year. Prices peaked at over $500/ldt in mid-2014 and have fallen dramatically to the low prices on offer today and are at their lowest since August 2009. The major drop in scrap prices across the subcontinent to large extent was driven by strong imports of Chinese billets (semi-finished metal products) which provided an easier and cheaper alternative to ship scrap”.

 According to the relative data, “just one VLCC demolition sale was concluded last year, while Suezmax scrapping was non-existent. In November the VLCC “ALBA” (built 1989) was sold by Single Buoy Moorings to Bangladesh breakers having purchased the vessel in April 2011 for a potential offshore FPSO conversion. The tanker had been anchored off Labuan since September 2012 and her fate may have been finally sealed as a result of the low oil price as the demand for offshore projects collapsed.

 Three Aframaxes were scrapped, all 1992 vintage, the first sale in March sold for $380/ldt, while the third sale in November only achieved just $250/ldt. Seven Panamax/LR1 tankers were sold, which included the youngest tanker sale the “JI LI HU” at just over 15 years of age. The remaining tonnage sold (18 units) were all MR size, including the oldest demotion sale which was just short of 34 years of age. The average age of all tanker tonnage sold for scrap amounted to 25 years.

 In the near term, prospects both in the crude and the product tanker market remain robust and coupled with the age profile of the fleet and the low lightweight prices on offer; demolition activity in 2016 is anticipated to remain at highly restricted levels. Lower bunkering costs also mean that fuel efficiency is less of an issue and thus extending the life of many tankers. With the continued delay in implementation of the Water Ballast regulations and the limited potential for FPSO conversion projects, the likelihood is that levels of tanker removal this year could be even more challenging”, Gibson concluded.

 Meanwhile, in the crude tanker markets this week, in the Middle East, “the euphoria of the Pre-Holiday VLCC scene has been fairly well punctured. For most of the period Owners held their heads up well, despite the disrupted cargo flow, but as the January programme entered its final phase, and good availability remained, a harder hit was difficult to resist, leading rates down to ws 65 to the East and to around ws 40 West ? roughly a 30 pct Worldscale drop from prior to the holidays.

 Further softening may yet be seen, but Charterers will soon be weighing up whether to go bargain shopping once again, which may provoke a rebound if they do. Suezmaxes, on the other hand, showed much less variance over the period ? ws 85 East is now ws 80, and ws 50 West is now close to ws 40…and still soggy, but forward dates may see levels propped up by the exodus of tonnage departing for potential West African opportunities. Aframaxes eased off a little to 80,000 by ws 110 to Singapore, but there are tentative signs that things could improve somewhat over the coming week”, Gibson concluded.

(Source : Hellenic Shipping News Worldwide)