China Merchants Energy Shipping warns of huge loss

The Shanghai-listed firm forecast a deficit of RMB2.2bn ($363m) in the financial year ended 31 December 2013, compared to a profit of RMB91.07m in the previous year.

CMES said it is preparing to cope with the decline in asset value of its oil tanker fleet and losses on the disposal of two oil tankers to the scrapyard in the 2013 financial year.

“In 2013, the tanker shipping market continues to be hit by an oversupply of capacity, slow growth in demand and low freight rates. A slight market recovery was only seen in the fourth quarter of the year and the start of this year,” CMES commented.

It also noted that in 2013 the age of the scrap candidates of VLCC has fallen to around 20 years old and in some cases, 15-year-old VLCCs were also demolished.

“In recent years, major oil companies have preferred not to use tankers that are 20 years old and above, leading to an increasing lack of demand for these tankers,” the company said.