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Key first-half VLCC rates plunge to lowest levels this century

Spot VLCC rates on the benchmark TD3C trade representing 270,000 dwt vessels between the Middle East and China, plunged to just $500 per day, according to Gibson Shipbrokers, the lowest level since the firm’s records began in 2000.

Paul Bartlett, Correspondent

July 19, 2021

1 Min Read
Tanker at sunrise on Singapore anchorage
Photo: Marcus Hand

The rates, applicable to slow-steaming, non-scrubber, non-eco units, were the lowest of any tanker sector, earning even less than handy and MRs deployed on benchmark round voyage trades, the broker said.

In its latest weekly report, Gibson noted that according to Kpler, a commodity analyst, total first-half Middle East crude exports, which underpin the world’s VLCC trades, fell to 15.25m barrels per day (bpd), more than 12%, compared with the first half of 2020. The decline was evening greater compared with first-half 2019.

This reduced demand has coincided with significant new supply, Gibson noted, with 37 VLCCs delivered since July 2020, and only six sold for recycling.

The broker noted, however, that a few floating storage units have been reported sold for scrap recently as demand in that sector of the market has fallen sharply. Compared with peak numbers in June 2020, when Gibson estimates that 77 VLCCs were deployed on storage contracts, the firm’s latest estimate shows just 25 vessels in non-Iranian storage.

The broker said that one likely factor explaining why non-scrubber, non-eco VLCCs have lagged behind other tanker sizes is the relatively high take-up of scrubber technology, now accounting for 39% of the existing fleet with another 5% waiting for retrofits, and 34% of the orderbook. Scrubber technology has not penetrated other tanker sizes to the same extent, the firm noted. So, scrubber-fitted VLCCs deployed on long-haul routes out of the Middle East benefit most from higher fuel prices because the price differential between heavy fuel oil and VLSFO has widened significantly.

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Gibson’s conclusion that there are plenty of tankers around that can achieve higher returns therefore begs questions over the future of non-scrubber, non-eco VLCCs.  

About the Author

Paul Bartlett

Correspondent

UK-based Paul Bartlett is a maritime journalist and consultant with over four decades of experience in international shipping, including ship leasing, project finance and financial due diligence procedures.

Paul is a former Editor of Seatrade magazine, which later became Seatrade Maritime Review, and has contributed to a range of Seatrade publications over the years including Seatrade’s Green Guide, a publication investigating early developments in maritime sustainability initiatives, and Middle East Workboats and Offshore Marine, focusing on the vibrant market for such vessels across that region.

In 2002, Paul set up PB Marine Consulting Ltd and has worked on a variety of consultancy projects during the last two decades. He has also contributed regular articles on the maritime sector for a range of shipping publications and online services in Europe, Asia, and the US.

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