Tankers sold for demolition last year were one of the few silver linings, as activity rose on the back of diminishing freight rates. In its latest weekly report, shipbroker Gibson reported that “one of the few bright spots for the tanker market last year was the notable increase in recycling sales. Of course, this could be viewed as a double-edged sword as many of these sales could have been a result of poor earnings across most of the tanker market sectors. Another factor to consider is that lightweight prices gained steadily throughout 2017, closing the year just shy of $450/ldt for sub-continent sales. By the end of December, lightweight prices for tankers were approx. $100 tonne higher than the corresponding month in 2016. However, tanker recycling activity could only improve after the low level of sales recorded for 2015 and 2016 and lightweight prices have continued to rise into the new year which we hope will attract more sales”, the shipbroker said.

According to Gibson’s data, “in deadweight terms tonnage sold for demolition in 2017 amounted to 9.78 million tonnes, 86 units (25,000dwt+). The young age of the tanker fleet continues to be a barrier to sales, however, changes to OPEC production quotas began to bite in 2017 and unlike the previous year, the continuous stream of newbuildings across most sectors began to impact on earnings heaping pressure on older units. Older tankers found it increasingly difficult to get traction in the market and some owners may have found lightweight prices to be tempting”.

The shipbroker added that “last year we witnessed 11 VLCCs committed for demolition (average age 21.5 years), with the last sale in December, PLATA GLORY (built 1999) achieving the highest reported lightweight sale price at $438/ldt. Five Iranian controlled VLCCs were sold to Indian breakers, accounting for 1.5 million dwt. Of the 86 tankers sold last year, Bangladesh breakers took 46 units (5.1 million dwt), while India took 35 (4.3 million dwt). The final destination of the remaining five units is yet unknown. Pakistan remains absent from tanker demolition for the moment, following a series of explosions at recycling facilities in 2016. Twelve Suezmaxes (average age 22.5 years) and a sizable 30 Aframax/LR2 sales (average age 21.4 years) were concluded, the highest number since 2013. Our statistics above include only tankers removed from the conventional trade for demolition. However, five additional VLCCs were removed permanently from the trading fleet to take on FSO/FPSO duties, which accounted for the removal of a further 1.5 million deadweight”.

According to Gibson, “last January we alluded to the impact that pending legislation would have on demolition sector. In the event the IMO bowed to pressure to lessen the impact on owners softening the implementation of the Ballast Water Treatment convention (BWT). Owners have now turned their attention to the new 2020 sulphur limits, which we believe in combination with BWT, will exert greater pressure to increase scrapping levels as we head towards the end of the decade. The recent price hikes in bunkering costs could also heap pressure on owners to scrap, particularly for tankers with less efficient bunker consumptions. Tanker market fundamentals have changed considerably from a year ago, all of which could combine to be the catalyst for higher levels of removals in the near future”, it concluded.

Meanwhile, in the crude tanker this week, in the Middle East, Gibson said that “a lone, last minute VLCC deal to the East at the very close of last week that paid a noticeable premium, jolted the market into a vigorous, and positive, reaction at the opening bell this week, and the relief/euphoria drove rates up to a peak ws 62.5 East as a result. Thereafter, Charterers looked around to see that good availability remained, and decided to shut the taps once again, demand then softened somewhat, and older units accepted down to ws 50 also. A more cautious approach likely over the next phase. Suezmaxes bumbled along with only modest interest hitting up against easy supply – rates remained stuck at around ws 70 (18 Worldscale) to the East and sub ws 30 (18 Worldscale) West with no real cause for early change. Aframaxes kept flat through the week, but are now starting to resist ‘last done’ 80,000mt by ws 92.5 (18 Worldscale) numbers to Singapore and may add a little to the scoreboard next week”, the shipbroker said.