Earnings
from a sustained firm spot market, which has lasted for several months,
have translated into an increase in secondhand VLCC prices by 13.5%
(five-year old) and 55% (15-year old).
Despite the recent decline in spot earnings, asset values continue to
be robust, as interest in new tankers remains firm and spot earnings are
still above the breakeven levels. However, which course the market
takes going forwards is less certain, Gibson Research said in a recent
report.
To 7th August this year, 38 VLCC orders have been placed,
exceeding the 36 orders seen in 2014. The current orderbook now
corresponds to 18.4% of the existing fleet.
Furthermore, the fleet’s young age profile will limit the number of
scrap candidates in the medium term. Stagnant fleet growth, which has
helped support the market this year, is expected to change later in
2016.
The recent agreement to lift Iran’s embargo, could see increased crude
production in an already oversupplied market, a positive demand side
development. With OPEC stating recently that production will not be
reduced to accommodate Iran, few signs indicate a decrease in output.
Optimism still appears high, supported by recent VLCC sales. For
example, Frontline’s 2000-built VLCC ‘British Purpose’ was one of three
15-year old vessel sold in late June for a reported $36.6 mill each. The
average value of a 15 year-old VLCC has increased by about $3.5 mill
since the end of June, and a staggering $10 mill since the beginning of
January.
Frontline, which has a strong VLCC presence, was trading at $2.90 per
share (NYSE) at the end of last week. The company, along with Euronav,
Nordic American Tankers and a number of other publicly traded tanker
owners, is currently being traded at a notable premium to its net asset
value (NAV).
This spread signifies that investors still have a bullish outlook for
the crude sector. Nevertheless, they should be cautious, as the
expansion of new Middle East refining capacity is likely to weigh on
crude exports, due to crude producers seeking to maximise product
exports.
In addition, the return of NITC’s ‘idle’ VLCCs could hit the market
sooner than Iranian crude, whilst an additional 61 VLCCs are scheduled
for delivery next year. Moreover, China, the world’s second largest
economy, is faltering and analysts expect lower economic growth, as the
country faces a more challenging times ahead. The obvious impact would
be a drop in commodity demand.
If VLCC rates come off for a sustained period of time, asset values may
start to stagnate or decline. Yet, China still has strategic reserves
to fill, which could offer a critical lifeline in the face of waning
domestic demand. Asset values, whilst well below the 2008 highs may
therefore be nearing their peak.
Newbuilding and secondhand prices have started to converge after a
prolonged period of strong earnings, yet a recent dip in spot rates
could reverse this trend. With forecasts predicting a downward
correction next year, asset values may have limited scope for further
improvement, despite the fact that several of the dominant players are
being traded at a premium to their NAV.
Secondhand prices could continue to follow a slightly different trend
in the short term relative to newbuilding prices, as owners are still
keen to enter a firm market. As a result, secondhand VLCCs may therefore
appear an attractive investment, but with so much uncertainty in many
of the aspects mentioned above, the future could still be challenging.
In the VLCC charter market, on the surface, it has been yet another
slow week for the VLCCs in most loading areas, Fearnleys reported.
Rates were under constant downward pressure and have fallen to almost
$30,000 per day for MEG/East voyages from the peak at close to $90,000
per day seen this year.
Despite the monthly MEG level of business seemingly lagging, there has
been activity under the radar, which brought the count up to ‘normal’
levels.
The start of this week brought increased activity, but this has
predominantly been seen in the Atlantic for voyages back to the East and
rates for this trade have also fallen sharply.
The oversupply of tonnage remains, but supply looks slightly more
balanced and rates for the major VLCC-routes may be at or close to the
bottom for now, Fearnleys said.
Other broking sources reported this week that Nigerian-controlled PPPFM
had fixed the 1996-built VLCC ‘Tajimare’ for two years at $45,000 per
day.
In other chartering news, Scorpio Tankers (STI) confirmed that the company had taken delivery of two LR2s this month.
‘STI Lombard’ was delivered from Daehan Shipbuilding under a bareboat
charter-in agreement for $10,000 per day. Upon delivery, she began a
voyage for 45 days at around $45,000 per day, while the ‘STI Kingsway’
was delivered from Sungdong Shipbuilding. Upon her delivery, she began a
voyage for 46 days at about the same rate.
The 2015-built MR ‘Elka Delphi’ was reported fixed to Total for 12
months at $17,850 per day, while the 2002-built Handysize ‘FD Sea Wish’
was said to have been fixed to Navig8 for two years at $16,500 per day.
A trickle of newbuildings reported included Ceres Hellenic (Unisea)
declaring options for two more Aframaxes at Samsung for 2017 delivery,
bringing the number up to four, Asahi Tanker was believed to have
ordered two plus one option MRs at Minaminippon for 2017-2018
deliveries, while four MRs were thought to have been ordered at Hyundai
Mipo at $35.5 mill each for unknown interests, believed to be European.
Finally, two 2008-built MRs - ‘Super Star’ and ‘Harbour Star’ - were reported sold to unknown interests for $23.5 mill each.
No comments:
Post a Comment