Low rents speed up scrapping of single-hull tankers

Scrapping of older supertankers with single hulls will speed up as a collapse in rents leaves the vessels unable to find employment, Fearnley Consultants said. Daily returns from hauling two million-barrel cargoes of Middle East crude oil to Asia have slid 93 per cent since Jan 19 to US$6,538, according to the London-based Baltic Exchange. That´s less than two-thirds of the US$11,601 that Drewry Shipping Consultants estimates owners need to meet crewing, repairs and other daily running costs.
A global phase-out of single-hulled oil tankers started this year, and a ban by the International Maritime Organisation takes full effect in 2015. The number of single-hulled carriers has fallen to 50 from 80 at the end of 2009, Sverre Bjorn Svenning, an Oslo-based analyst at Fearnley, said.
´At one point in time, they will have to make a decision whether to scrap´ or seek alternatives that exclude transporting oil, Mr Svenning said, referring to tanker owners. ´Single hulls will be without employment´ and are already ´at the back of the line´ when oil companies are seeking to charter vessels, he said.
Supply of the ships in the Persian Gulf, the biggest cargo-loading region for crude oil, is at its highest for at least six years, Imarex ASA, an Oslo-based freight derivatives broker, said last week. Frontline Ltd, the world´s largest operator of supertankers, said on May 21 it needs US$31,100 a day to break even on the carriers.
Frontline said last week it is anchoring ships and declining cargoes until the plunge in rental rates is reversed.
Most single-hulled carriers will cease transporting oil in the second half of this year, Mr Svenning said. The ships make up 10 per cent of the global supertanker fleet, according to Lloyd´s Register-Fairplay data on Bloomberg.
The current slump in charter rates stems from a ´seasonal´ decline in refineries´ demand for crude oil during the Northern Hemisphere summer, according to Mr Svenning.
There are 20 per cent more ships available in the Persian Gulf than there are cargoes over the next 30 days, according to a Bloomberg survey of seven brokers and owners on Wednesday. A week ago, the excess was 16 per cent.

Source: Bloomberg