Nov. 25 (Bloomberg) -- The number of
the largest oil tankers valued at scrap-metal prices jumped fivefold in a year
as a glut of the vessels cut their earnings to the lowest level since at least
1997, Seasure Shipping Ltd. said.
101 very large crude carriers are now
valued at demolition prices, up from 19 a year ago, the London-
“A lethal combination of falling asset
values driven by poor earnings, financial distress and a strong market for
scrap steel has beached an increasing number of vessels at or close to
demolition value,” Alex
Adamou, lead quantitative analyst at VesselsValue, said in the e-mail. “A
vessel which would have traded at an 81% premium to her demolition value in
January now finds herself valued as nothing more than a floating piece of
steel.”
Frontline Ltd., the world’s largest
VLCC operator, said this week it’s seeking talks with creditors and may run out
of cash and breach loan terms. Earnings from the vessels averaged $11,372 a day
in the third quarter, the lowest since at least 1997, according to Clarkson
Plc, the world’s biggest shipbroker. General Maritime Corp., the 2nd-largest U.S.
Oil Demand:
Tanker owners ordered too many new
vessels during a 4-year boom that lasted to 2008, creating an oversupply that’s
depressed returns and ship prices as global demand growth for crude weakens. In
the Persian Gulf , the largest loading region,
ships competing to haul crude have outnumbered cargoes by 16% on average this
year, according to weekly shipbroker and owner surveys by Bloomberg.
Returns for VLCCs will average $15,000
a day for the next 2 years, less than half of the $34,500 they need to break
even, Pareto Securities ASA said in a report last month. Average earnings for
the vessels, which peaked in 2004 at $97,000 and were at $93,000 four years
later, fell to $19,000 by 2011, according to the Oslo-based investment bank.
Prices for 15-year-old VLCCs have
tumbled 44% since the start of the year as scrap values rose 2%, said Adamou of
VesselsValue.
Demolition value is calculated by
multiplying the price of steel scrap by light displacement long tons, or the
weight of a ship’s hull, machinery and equipment.
About 47% of crude oil traded is
shipped by sea, Pareto said.
--Editors: Dan Weeks, Sharon Lindores.
Source: By Michelle Wiese Bockmann (mwiesebockma@bloomberg.net). 25
November 2011
http://www.businessweek.com/news/2011-11-25/oil-tankers-valued-as-scrap-jump-fivefold-as-returns-collapse.html
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