VLCC earnings fall, but maintains at healthy levels

However suezmax and aframax earnings held up well. Despite the big drop in VLCC earnings, they are still at pretty healthy levels historically.

One year time charter rates for large tankers are continuing to climb suggesting charterers think the market still has legs and even three-year rates are not substantially lower than one-year rates. Some 59 VLCCs have been time-chartered this year to date according to Clarkson Research - a level not seen for decades - while 30 suezmaxes and 52 aframaxes have been chartered, also very high levels.

What is a bit odd is that VLCC asset values have not risen as much as you might expect according to a recent release from VesselsValue, an outfit that tracks and analyses vessel values. They put that down to sellers reluctant to let go of their ships in such a good market unless values increase substantially, combined perhaps with worries about how long the good times will last with substantial newbuildings in the pipeline.

The newbuilding situation is that 18.6m dwt of new vessels is due to deliver next year and another 17m dwt, so far, thereafter, in other words nearly 20% of the existing fleet. Demolition of large tankers this year has been negligible both from the obvious reason of a good market but also the bottom dropping out of the scrap market pricewise.

The products market is also having a good year so far with earnings in the LR2 and LR1 sectors averaging over $30,000 a year and $25,000 a year so far in 2015. MRs have seen earnings almost double this year to upwards of $20,000 a day.

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