Shipyards report strong orders for VLCCs

High earnings in tanker trades in the last three years have led to a heavy increase in owners contracting newbuilding tankers across the whole size range.

The sheer amount of tonnage on order and forward level of shipyard order books has not been as high nor as long for more than 30 years. Apart from the availability of money to pay for these vessels, this year there have been other enticements.

The introduction of Common Structural Rules by classification societies on April 1 led to a flurry of orders before that date arrived.

Then as order books started to fill, there was an anticipated shortage of building berths as both large gas ships and large container ships started to compete for shipyard space.

The phase-out schedule of single-hull tankers from 2010 also concentrated shipowner's minds and led to many of them picking up the telephone to Far Eastern shipbuilders.

Soon 2009 and 2010 were looking congested and some Far Eastern owners ordered vessels from their favourite shipyards for 2011 delivery. And things haven't stopped there. Newbuilding prices are still firming as the price of steel increases.

The number of VLCCs on order increased by 60 during the first ten months of this year, taking the forward delivery for these units into 2011. Buyers for new Suezmaxes, which of course need smaller building facilities, might be able to squeeze into 2009 although an extra 35 have been ordered in 2006.

And so it goes on 100 new Aframaxes, 130 Panamaxes, some being coated and clean product-suitable and 180 dedicated product carriers.

By the end of October brokers were reporting that the total tanker order book comprised more than 116 million tonnes deadweight, with nearly 1,200 new ships being contracted.

VLCC rates to the Far East are softer. Exxon concluded the double-hull Safwa from the Arabian Gulf to Japan at Worldscale 72.5. PTT took the similar Koho 1 for a trip to Thailand at WS65. Rates for VLCCs from West Africa to the US levelled off at about WS90 and steadied to the Far East and India at WS80. BP fixed the Angelicoussis to the US Gulf at WS92.5

Suezmax

Suezmaxes from West Africa bucked the trend a little last week when they peaked at WS127.5. They then fell back to WS120 for both US and north European discharge, but then firmed as competition to fix tonnage before the Thanksgiving holiday in the US became a factor. Sun fixed the Astro Phoenix to Chesapeake Bay at WS150 and the Cosmic to the US Gulf at the same rate. Mediterranean Suezmax rates rose slightly, but from a low base of WS90, as more Black Sea cargoes were seen. Clearlake needed a replacement vessels on specific dates and were forced to pay WS145 for the Searacer for a cargo from the Black Sea to Euromed, a rate higher than normal.

Aframax

Aframax tankers did not fare so well. A lack of demand saw Caribbean rates fall sharply, while there was little strength in either the North Sea or the Mediterranean. East of Suez, rates remained steady at about WS150 for Arabian Gulf and WS140 for East Asia loadings. In the clean market, temperatures were slightly colder in Asia, increasing demand for heating oil and reducing stock levels.

In the Arabian Gulf, some larger clean tonnage has been attracted to longer-haul cargo movements to the west, leaving a slight shortage in available tonnage. This did not go unseen by LR2 owners, so rates have firmed slightly for trips from the Gulf to East Asia.

Brokers report that on trans-Atlantic clean markets, the arbitrage window for petrol to flow from Europe to the US was open.

The writer is a shipbroker and marine consultant with more than 40 years of experience in the tanker and dry cargo markets.