The Tanker market in
2003 (2) |
|
The second-hand oil tanker market |
This year has allowed owners to
regain a smile that they had lost the previous year when
ships' values had depreciated by 10 to 15 % between 2001 and
2002. In 2003 owners saw prices not only reach and surpass
the 2001 levels, but they above all benefited from an
average return which was more than adequate. Between end
2002 and end 2003 the price of tankers increased by 20 to
35 %. Excepting VLCC, only single-hulled vessels built right
at the beginning of the 1990's did not enjoy this
resurgence. Ships' values have risen considerably, aided
by:
-
a favourable economic climate in
the Far East and a recovery in the US,
-
an end to the major concerns as to
the future of Iraqi crude reserves,
-
increased crude production,
-
the price of new-buildings and the
scrap value of ships on the rise,
-
the increased problems of
substituting a second-hand purchase by a new-building,
-
the introduction of new
regulations concerning the accelerated elimination of
single-hulls by the E.U. and the IMO,
-
a growing number of transactions
based on entire fleets or of several ships 'en bloc'.
The rise of daily returns which
has already been alluded to, merits a closer examination.
Firstly, the price and volume of activity has been sustained
because buyers and sellers have seen good reason to join
hands. This state of affairs was often missing in the market
these past years. The German KGs, not seeing any
propositions from containers, came into the second-hand
tanker market en masse and soon became model buyers. Their
presence clearly helped push up the price of modern ships
(those built after 1995) very abruptly. Traditionally rather
prudent in their approach, the KG companies became little by
little prepared to take bigger and bigger risks as they no
longer made it a condition to find cover for their
employment on signing. They even finished by accepting
employment in a future placing of the ship in a pool without
getting minimum guarantees. At the same time, the increase
in revenues gave the big groups substantial liquidity and
logically promoted transactions entailing entire fleets or
deals 'en bloc', and we shall see numerous examples in the
listing detailed below.
In the same way the rise in the
price of newbuildings from the start of the year and the
pushing back of the completion dates on deliveries by
shipyards allowed the modern second-hand ships to become
serious competitors in face of the recurring orders. It
should be remembered that the price of tanker newbuildings
was coming under nearly constant erosion from 1993 until the
end of 1999, before rising briefly from January 2000 till
mid-2001 (the 'Erika' effect) then to plunge again until
January 2003. Owners who possessed modern ships built in the
90's could not therefore compete with prices being offered
by the shipyards. The depreciation which they incurred
placed them at the same level of values as new ships being
offered out of the yards, with their age in addition! This
situation is behind us for the time being, but some owners
have clearly understood that it could be judicious to sell
these units, even if it means seeing buyers collecting very
good revenues for several months, before they reinvest
themselves in other units either older or younger.
The
anticipation of the introduction of the new rules concerning
the elimination of single-hulls by the E.U. and the IMO has
helped tip the balance and has given an impetus to the rise
in price of newbuildings due to the stampede towards
available slots in shipyards, but also on second-hand modern
ships through re-sales. These new rules which are detailed
in our table below will doubtless penalise owners of quality
ships which are not entirely double-hulled if the market
turns around rapidly.
|
But one has to be careful that the
repeated introduction of new regulations does not have
perverse effect and contrary to what governments are seeking
in general and Madame Loyola de Palacio in particular. In
practice, whilst we may regret that in France a company like
Services et Transports has decided to leave the shipping
scene, we should be aware and sensitive to the warning
signals in the global context which is being sent by the
Niarchos group (Greece) and Bergesen (Norway) who have
decided to get out of the ownership of tankers. Owners of
such irreproachable fleets, some of the best in the world,
who have been associated with the history of tanker shipping
for several decades, have nonetheless decided to no longer
run the risk of exposing their non-maritime assets to the
enormous financial risks that they are running with their
tankers in view of the rules imposed by the E.U. and the
American OPA.
A French, Greek, and Norwegian
shipowner have all come to the same conclusion. This type of
question should not be allowed to spread, as it then would
remain to be seen what sort of type of ship-owner would be
left in the longer term to transport oil?
|
|
The price of VLCC skyrocketed in
2003 and buyers had to fork out more than 30 to 50 % more
compared to 2002 depending on the size and type of VLCC.
44 units changed hands this year
compared to 24 the previous year and 37 in 2001. These
transactions were therefore well-sustained and the positive
prospects on future freight rates has at last allowed modern
and double-hulls to become the front-runners, as with the
scarcity of available docks. This phenomenon affects all
sizes, from VLCC to Panamax.
Only three units from the 70's
were sold for storage projects, such as the t/t 'Berge
Bragd' of 310,997 dwt built in 1977 for a price of $10.2
million. Eighteen single-hulls built between 1981 and 1994
changed hands and prices rose steadily as was illustrated by
the sale of m/t 'Tamba' of 259,999 dwt built in 1994 for
$27.2 million in March 2003 and the sister ship m/t 'Diamond
Falcon' for $32.5 million in November 2003. Out of the 18
deals, 9 ships went to Greek owners, who are better
qualified to deal with the risks of acquiring single-hull
ships. The remainder was divided between Far Eastern buyers
and projects for storage conversion.
The year 2003 is characterised by
the considerable number of double-hulled VLCCs sold, as they
numbered no less than 23 compared to only 5 the previous
year and 14 in 2001. Out of these 23 sales, 15 of them
formed part of 7 transactions carried out en bloc. Elsewhere
prices kept shooting up over the months, as can be seen with
the sales of the m/t 'Picardie' 297,960 dwt built in 1999
for $62.4 million in February and that of the m/t 'World
Creation' 300,000 dwt built by the same shipyard one year
earlier which achieved $75.0 million in December 2003. And
to appreciate the full blast of this price explosion,
finally there was the sale of the m/t 'Poros' of 300,000 dwt
built in 2002 sold in December for $85.0 million for a quick
delivery whereas the 'theoretical' price of a newbuilding is
around $75.0 million for delivery in 2007.
This year, 27 ULCC/VLCC went for
scrap against 38 entering into service. This figure is
inferior to the 36 units that were demolished last year in a
very depressed market. Out of the 27, 8 VLCC were built in
1975 and simply anticipated their destiny by several months
due to the new rules of the E.U. which were finally enacted
in October 2003. The IMO ruling would have allowed these
ships one more year of grace. Sales quite logically were
concentrated during the summer months went the daily returns
were at their lowest.
|
|
Ships of 120,000 to 200,000 dwt
regained favour with the market players. There have been no
less than 53 transactions in 2003 whereas we have only
registered around 20 during the past four years. This return
to grace came about due to a sustained activity in the
Mediterranean and in West Africa. They were also able to
play their 'swing' role when the VLCCs and the Aframaxes
both became scarce commodities in the market.
Only 2 ships built in the 70's
changed hands: the m/t 'Polytrader' and the m/t
'Polytraveller' 125,700 dwt built in 1978, for a price in
the range of $4.25 million apiece. A fair number of
single-hull ships built between 1983 and 1993 got exchanged,
as we saw 14 deals done. In particular there was the sale en
bloc of 7 single-hulls: 'Crude Sun', 'Crude Sky', 'Crude
Transporter', 'Crude Star', 'Crude Med', 'Crude Target', and
'Crude Traveller'. They were part of one of the biggest
transactions of the year, for a total of $517.0 million,
consisting of 18 ships of which the 7 Suezmax single-hulls,
6 Suezmax double-hulls and 5 Aframax. The value of the
single-hull Suezmax stayed relatively stable in comparison
to the rocketing of the VLCC single-hulls. Thus the m/t
'Geres' of 142,000dwt built in 1989 was sold at a price of
$19.0 million in December.
The majority of the deals were
concentrated on the modern double-hulled ships, namely 37 of
which a good number were done en bloc. The German KGs proved
to be particularly aggressive. For example there was the
sale of the m/t 'Decathlon', m/t 'Pentathlon' and m/t
'Triathlon' of 150,000 dwt, all three built in 2002, for a
price around $55.2 million each to a KG against a 5 year
time-charter at $23,500 per day. The value of this type of
ship has seen a rise of roughly 25 % compared to estimated
values last year.
The number of Suezmax sold for
scrap this year was 10 compared to 15 last year. Twenty-five
new ships entered the fleet in 2003.
|
|
Transactions of second-hand
Aframax doubled between 2003 and 2002, with a total of 70
sales as compared to 35 the previous year. Only three units
from the 70's were sold, including the m/t 'Seasalvia',
88,396 dwt in 1979 for a price of about $4.0 million in
January.
The age group between 1980 and
1989 were particularly in demand and 31 sales of
single-hulls were registered. Buyers were principally and
logically based in the Far East in the context of 'straight'
sales, and in
Greece for sales
which had an employment attached. We can cite the sale of
m/t 'Ideal' 99,358 dwt 1981 for $5.5 million to Pakistani
buyers and the sale of m/t 'Charles B. Renfrew' and m/t 'R.
Hal Dean' of 78,655 dwt built in 1988, en bloc for $19.5
million with 3 years time-charter at $15,000 per day.
Modern and double-hulled Aframax
were in particular demand as 36 changed hands, against only
5 the previous year, with 9 being resales. 10 sales on their
own comprised some thirty ships. As examples there were the
sales of m/t 'Koa Spirit' and m/t 'Kiowa Spirit' 113,334 dwt
built in 1999 as well as the m/t ''Bahamas Spirit' of
107,000 dwt built in 1998, sold en bloc to a German KG for a
price of $106.4 million against a 7 year time-charter at $18
000 per day.
Thirty-five Aframax went to
demolition as compared to 20 the previous year. This is to
be set against the figure of 75 vessels delivered this year
and an orderbook which currently comprises 165 ships.
The Panamax also enjoyed a healthy
volume of trade. 45 ships changed hands in 2003 against 11
in 2002 and 22 in 2001. The breakdown by age was totally
incongruous as 17 ships were single-hulls built between 1978
and 1988, whereas 28 other sales were done with
double-hulled ships delivered or to be delivered between
1999 and 2005. The category 1989-1998 saw no business. Of
the representative sales this year we would cite the
following: m/t 'Lucy' and m/t 'Suzanne' of 64,000 dwt built
in 1986 for $10.0 million each to Indian buyers and the m/t
'Stena Venture' and 'Sunlight Venture' 70,000dwt built 2002
and 2003, sold for $35.7 million each to a German KG against
an eight year charter. 22 ships in this category came into
service in 2003. This represents the first course of a
gargantuan order comprising of no less than 132 ships! This
is perhaps an explication for the numerous deals made to the
German KGs this year by Italian and Greek owners.
The number of Panamax which went
to scrap was 23 (including those over 32.20 m in beam but
with a deadweight inferior to 70,000 dwt). If one takes into
account the exact number of ships demolished with a beam
less than 32.20 m, we come to 15, namely two more than in
2002. Scrappings will need to be increased in the short term
in order to keep a tighter balance between supply and demand
for Panamax tonnage, as 132 units are already ordered at the
end of 2003.
|
|
If ever there has been a market
which has been turned around by events in 2003, and in the
best sense, it is with the OBOs. This category of ship has
benefited no only from the improvement in the oil sector,
but especially from the fabulous boom in dry bulk. As a
result prices have been moving upwards right throughout the
year.
Consequently 23 ships were
exchanged in 2003 as against 9 and 11 respectively for the
two previous years. All sales were concentrated in ships
built between 1980 and 1985 and Chinese buyers proved to be
the most active. For example the OBO 'Pharos' 75,000 dwt
built in 1983 was sold for $4.3 million in April and her
sister ship 'Minoas' built 1981, thus 2 years older,
achieved $5.5 million in November.
The renewed interest in this type
of ship has naturally put a damper on their demolition and
whilst we saw 13 ships scrapped in 2002, there were only 5
which left the scene in 2003.
|
The outlook |
Europe, although lagging at the
moment, will in time catch up with the more aggressive pace
of the front-runners - China and the US, and participate as
a matter of course in maintaining the crude oil production
and the transport needs. Even Japan seems at last to have
found the path to recovery.
Some old ships still in service
this year will disappear in 2004 (thanks to EU/IMO
regulations) which will help to maintain a level of balance
between supply and demand and to support prices. The marked
absence of modern candidates up for sale which was felt at
the end of 2003 will carry through for the first half of
2004 and this momentum will help keep values firm. The
impossibility to obtain reasonable delivery dates from the
shipyards will only help to accentuate this trend.
To know when to sell is difficult,
but 2004 could be a good time to be tempted, as it is clear
that the market has already anticipated the renewal of
necessary tonnage to fill the gap left by the latest
restrictions and regulations. It is still the case and
always has been that demand for tonnage is in fact the final
barometer as to the ultimate value of these assets. Demand
is currently strong and will remain so for at least the
short term, but it would be presumptuous to try to predict
further into the future.
We would like to conclude in
congratulating the French authorities who have caught up
with their reprehensible delays in the domain of port
inspections and who at the same time have decided to put
heavier fines on illegal deballasting operations. There is
still work to be done! We need to find a real answer to the
problems of ports and places of refuge. This will require a
certain courage and determination, but it is the price to be
paid to avoid another pollution of importance, as much as
with an old ship as with a modern one, as has already
happened in the past.
|
Shipping and Shipbuilding Markets in 2003
I N D E X
|
|