ECONOMY

Withdrawal date approaching for most single-hulled tankers

The experiment of the withdrawal of single-hulled tankers is of extraordinary interest to the world of shipping. What usually happens is that a new regulation is announced as the main framework of a new rule’s application and the market then adjusts to it in the course of commercial decisions. However, the now famous amendments by the International Maritime Organization to the MARPOL regulations against sea pollution have confounded the market, setting as a withdrawal time for single-hulled tankers the year 2010. The regulations suggest that ships must be withdrawn even if they have been built after 1982, although their use is allowed under certain circumstances but not past their 25th year of age, or by 2015 at the latest, whichever comes first. According to the regulations in place, four very large crude carriers (VLCCs) are set for withdrawal by 2009, while another 19 will go to the scrapyard either due to their age or due to their country of registration deciding not to utilize them beyond 2010. The rest are expected to continue operation beyond 2010, with their owners deciding on the time of their withdrawal, obviously keeping in mind the level and the fluctuation of freight fares, and with alternative solutions for their transformation from tankers into dry-bulk carriers or their continued utilization under the key condition that they successfully pass the costly process of inspections. At least eight single-hulled VLCCs were sold last year to be transformed into metal carriers, investing in the market of dry-bulk ships, while several tankers built in the 1990s were sold for the same purpose. Today, with the exception of west Africa, countries on the Atlantic do not accept single-hulled tankers, so the sole market remains that of the Far East. Trips between the Arab Gulf and India or Taiwan, China and Japan are the most common. Regarding the VLCC fleet, the number of new orders is considered low compared with the number of the vessels set to be withdrawn. At present, there are 157 single-hulled VLCCs and six with double hulls, while 152 are expected for delivery by the end of 2010. There is general realization that in practice the number of the tankers to be withdrawn and the ships to be delivered is virtually the same. However, the picture is not as optimistic as it seems. It is true that several tankers will be delivered ahead of their delivery date. In fact, 36 VLCCs will be delivered in 2008 and another 68 in 2009, while very few are expected to head for the scrapyard in that time, thus increasing their total number and reducing any chances of a major rise in freight fares. It is also interesting to note that at least half of the single-hulled VLCCs are over 15 years old, and will inevitably be heading to the scrapyard, although the exceptional market of dry-bulk vessels provides for the alternative solution of their transformation for that purpose. There are already plans for the transformation of 114 vessels, including 60 VLCCs destined to carry loads of metal. One other final resort for their use is the tankers’ transformation into units of production, storage and the unloading of oil to reserves close to the shore. Given the transformation and withdrawal options, it will be useful to see the consequences on the market of the withdrawal of 60 VLCCs in 2008 and 2009 and the delivery of the expected 104 VLCCs, which will change significantly the size of the global fleet in this important type of tankers. It is certain that many investors are closely following any changes, as their decisions will depend heavily on the market’s development and on shipyard availability.