Great Eastern Bets on VLCC Scrapping to Ease Tanker Woes

The only light at the end of the tunnel for large tankers seems to be scrapping, as 2018 is set to be another strong year when it comes to newbuilding deliveries, fuelling the market oversupply.

The tanker market has been under a great pressure as inventories went down coupled with strong tonnage supply from yards, leaving tankers struggling for work.

Tankers are experiencing the worst winter since 2012-2013, with earnings dropping below USD 10,000 in the spot market, G. Shivakumar, the Chief Financial Officer of the Great Eastern Shipping Company Limited, said.

” We expect that this year will be another strong year for fleet growth for crude tankers at least on a gross basis and about a middling year for product tankers. So net-to-net, we expect fleet growth of between 2 and say 5 pct for product tankers and crude tankers,” Shivakumar added.

As explained, the only encouraging sign is the tempo of scrapping seen in the first five weeks of the current calendar year. It is estimated that around 2 million dwt of tankers was scrapped so far this year.

” Our run rate is going at about 20 million dwt of scrapping. With the market being so weak, there are reports that there are quite a few VLCCs still lined up and looking to be scrapped. Scrap prices are quite high, they had gone up past USD 450/ltd two to three weeks ago and at those numbers for a VLCC, you would get USD 20 million as scrap price.

“So, it makes it quite an attractive proposition to scrap the ship rather than undergo a special survey or a drydocking, which would cost USD 3-3.5 million and we expect that people are taking advantage of this and scrapping their ships, especially given where earnings are currently,” Shivakumar pointed out.

Nevertheless, taking all the market fundamentals into account, this year is forecast to be weak for crude tankers. Product tankers could see a mild turnaround as supply winds down, while bulkers are likely to enjoy a decent recovery.

Commenting on the offshore market, Shivakumar said that no significant recovery is anticipated, despite oil prices going up.

India’s Ge Shipping, which specializes in bulk shipping and offshore, reported a consolidated net profit of Rs crore 98.18 in the third quarter of 2018 fiscal year ending December 31, down from Rs crore 255 reported in the same quarter for the previous fiscal year.

World Maritime News Staff