Plummeting values for 15-year-old very large crude carriers are anticipated to create a surge in the volume of these tankers sold for demolition.
Earnings no longer make them economical to trade and scrapping is likely to increase, according to a research note from Dahlman Rose.
The US investment bank said that with spot market VLCC earnings averaging around just $18,000 per day so far in 2011 and charterers showing a preference for VLCCs under 15 years of age, owners of these older vessels would be incentivised into selling ships for scrap.
On Friday, London-headquartered shipbroker Clarksons lowered its price assessment for a 15-year-old double-hull VLCC by $2m to just $28m, but Dahlman Rose’s Omar Nokta said that vessels built before 1996 were only worth around $20m-$25m.
By comparison, scrap prices above $500 per ldt imply a VLCC scrap value of around $19m, therefore “meaning their scrap values represent 75-95% of their trading value—the highest percentage since the early 1980s”, the bank’s report said.