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VLCCs buck contracting trend

VLCCs buck contracting trend

London: Orders for most types of tankers and bulk carriers have declined so far this year, according to statistics from Clarkson. However, VLCCs are the exception, with 99 new units ordered between January and August this year, taking year-on-year contracting figures up by a staggering 334%. No fewer than 21 new VLCCs were contracted in August alone, including a series of six 316,000 dwt vessels ordered by Ocean Tankers at Waigaoqiao for delivery in late 2011 and 2012; and four 318,000 dwt units for A.P.Møller and the Kuwait Oil Tanker Company, ordered at STX and Daewoo respectively, and all for delivery in 2011.

Meanwhile, new ship prices continue to climb as shipbuilders try to cover higher steel prices and brace themselves for yet more increases, likely in the months ahead. Prices for all ship types are up this year, with Clarkson's Newbuilding Price Index up more than 8% on its level one year ago. But tankers have shown double-digit price rises - VLCCs now cost over 14% more than they did this time last year whilst Suezmaxes are up by more than 12% and Aframax units by nearly 20%.

High steel prices are a growing headache for shipbuilders. According to Clarkson, both Japanese and South Korean steel mills are rumoured to be considering further price hikes. If yards can't pass on raw material cost increases to their customers, then the prospect is raised that some may go out of business and some existing contracts may not be fulfilled. However, a recent report by US investment bank Morgan Stanley suggesting that $22.7bn of the current orderbook may not get built has been criticised as too pessimistic. This would be equivalent to almost 22% of the total estimated orderbook value.  [16/09/08]