Almost all the 110 single-hulled supertankers in service at present will probably be decommissioned by the end of next year, according to Frontline CEO Jens Martin Jensen.
Analysts believe the upcoming ban on single-hulled tankers may be the catalyst needed to revive global tanker markets, which are currently suffering extremely depressed freight rates and earnings as a result of tonnage oversupply.
Players have also predicted a shrinkage of the global tanker fleet on the back of credit and financial difficulties leading to cancellations or delays of newbuilds as another positive factor for the market.
“The money needed to complete the order book does not exist in the world today,” according to Overseas Shipholding Group Inc CEO Morten Arntzen.
“We see a net reduction of the trading fleet next year,” he was quoted saying.
Arntzen had said last October that many tanker operators were funding their operations using retained equity because “debt isn't available” to buy new ships.
“This will lead to a number of cancellations (of ship orders). Some Greenfield shipyards won't get built or will end up in trouble,” he added.
Some players are even urging operators to 'bite the bullet' and cancel their current orders or simply scrap their ships, in an effort to stem the tide of tonnage oversupply.
“Some now look at the global economic problems as the cause of the shipping crisis, but the truth is that even without a global crisis we were building more ships than we were likely to need,” said Dr Helmut Sohmen, chairman of BW Group Limited in Singapore recently.
“My recommendation would be for owners of elderly vessels to seriously consider scrapping earlier rather than later,” he said.
“Turning to newbuilding contracts, I am not an advocate of defaulting on one's obligations, but there should be mutual interest in shipping companies, shipyards and banks working together to reduce the order-book,” he said.
Meanwhile, reports continue to indicate an increase is use of tankers for floating storage purposes. Historically, this has put upward pressure on spot freight rates due to vessels being taken out of the availability list. (See story links)
Approximately 70 VLCCs are currently being used for floating storage purposes, New York-listed Nordic American Tanker Shipping Ltd said in its first quarter results report on Tuesday.
But “the VLCC spot market is still very weak, with rates and earnings still flat around record lows, even though more and more VLCCs are supposedly being taken out of normal duty,” said one broker to Tankerworld on Monday.
“That shows you how massive tonnage oversupply is in the market at present,” he added.
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