There is increasing interest in investing in product tankers and VLCCs, as the contracts placed in January and February 2024 show
The first week of 2024 saw reports that Belgium-based Bocimar had invested in two 25,000-dwt stainless-steel chemical carriers, contracted at an undisclosed price at China Merchants Jinling shipyard in China. Also in the market for new product tankers was Greek owner Performance Shipping, with the announcement of two LR2 product tankers to be built at China Shipbuilding Trading Co and Shanghai Waigaoqiao Shipbuilding. Delivery is slated for January and April 2026, at a purchase price of US$65M per vessel.
Elsewhere, Furetank announced contracts for number 20 and 21 in the Vinga series of ships. These ice class 1A 17,999-dwt product tankers are designed by Furetank together with FKAB Marine Design. They all have dual-fuel capability and can run on liquefied natural gas (LNG), liquefied biogas (LBG) or gasoil and are equipped to use shore power. They are designed with a battery-hybrid solution.
And the world’s largest chemical tanker fleet operator, the Oslo stock exchange-listed Stolt-Nielsen, made a 13% acquisition in rival Odfjell Tankers. Between the two companies, a combined fleet would surpass 240 vessels, with Stolt-Nielsen controlling over 160 vessels and Odfjell more than 80 vessels.
In more news from Stolt-Nielsen, the company’s chief executive said its joint venture with NYK Line, NYK Stolt Tankers (NST), has reached an agreement with Nantong Xiangyu Shipyard in China to build six 38,000-dwt stainless-steel chemical tankers. They will replace ships retiring from the company’s fleet, beginning in 2026. Stolt-Nielsen Ltd chief executive, Dr Udo Lange, said: "This order reflects our strategy to maintain scale of our core 38,000-dwt fleet by adding newbuildings not otherwise available in the second-hand market in a capital-efficient way through our NST joint venture."
Cosco Shipping is also reported to have invested in product tankers with three LR2 tankers, two LR1 tankers and an MR2 tanker contracted from Cosco-associated yards in China. Three of the tankers are the first methanol dual-fuel vessel orders placed by the shipping company. The 114,200-dwt ships will be built at COSCO Shipping Heavy Industry’s yard in Yangzhou, with delivery pegged for 2026 and 2027. The combined order is worth US$289M.
COSCO’s Dalian yard will pick up the order for a pair of methanol-ready 64,900-dwt Panamax tankers (worth about US$130M) and a 50,000-dwt MR tanker (estimated at US$50M). Delivery for all three vessels is due at the end of 2026.
“In 2023 over 120 VLCCs, with a value in excess of US$5Bn, changed hands”
One surprise early this year was the announcement that Greek owner Maran Tankers is entering the shuttle tanker sector, with a US$390M newbuilding project at a South Korean shipyard. Maran Tankers signed a letter of intent with DH Shipbuilding for the construction of three Suezmax shuttle carriers, set to be delivered from 2027.
The company secured charters for the vessels from Brazilian energy giant Petrobras. The contract duration is 10 years with the option to extend for another five years, all of which will be operated for Petrobras. The venture marks a new trade opportunity for Maran Tankers in the expanding shuttle tanker industry.
February opened with the revival of VLCC contracting. Chinese shipyard Dalian Shipbuilding Industry Co (DSIC) reported that it had taken orders from "two European shipowners" for a total of up to 14 VLCCs worth US$1.8Bn, according to a Shanghai stock exchange filing from DSIC parent company China Shipbuilding Industry Co. The European shipowners were later identified as John Fredriksen’s Seatankers (six VLCCs and two options) and Evangelos Marinakis’ Capital Maritime & Trading (six LNG dual-fuel VLCCs).
Staying on the sale & purchase side, Tsakos Energy Navigation (TEN), sold the 2005-built Suezmax tanker Eurochampion 2004 to Gatik Ship Management of India. TEN said the sale and delivery are part of its commitment to fleet renewal, combining profitable vessel divestments with deliveries of high-end ’green’ vessels on long-term contracts.
TEN chief operating officer and president, George Saroglou, commented: “Eurochampion 2004 has served the company well over the years and we wish its new owners calm seas in its journeys. With the LNG-powered vessels now delivered, management will continue to explore growth opportunities on both the newbuilding and second-hand front while maintaining its interest in strategic sales to ensure a seamless fleet transition.”
In early 2024, TEN also acquired five vessels from Norway’s Viken Crude; two 2023-built dual-fuel LNG LR2 Aframaxes, one 2019-built super-eco Suezmax and two 1A ice-class scrubber-fitted Aframaxes (built in 2018 and 2019 respectively).
The vessels have an average employment of two years, with fixed and profit-sharing features totalling more than US$100M in minimum gross revenues.
TEN said it will fund the purchase with cash-at-hand and bank finance. The acquisition pushes TEN’s LNG-powered tanker fleet to six vessels. The owner has 12 scrubber-fitted vessels and 17 ships with ice-class capabilities; the pro-forma fleet stands at 72 ships of all categories.
VLCC Sale & Purchase Activity: 2004 to Date | ||
Second-Hand Sales (No) | Value (US$M) | |
2004 | 68 | 3,827 |
2005 | 32 | 2,768 |
2006 | 33 | 2,205 |
2007 | 38 | 2,441 |
2008 | 18 | 1,275 |
2009 | 27 | 712 |
2010 | 57 | 3,438 |
2011 | 35 | 1,577 |
2012 | 27 | 730 |
2013 | 31 | 890 |
2014 | 85 | 4,299 |
2015 | 52 | 3,631 |
2016 | 31 | 1,154 |
2017 | 48 | 2,003 |
2018 | 38 | 1,220 |
2019 | 63 | 1,795 |
2020 | 93 | 2,504 |
2021 | 116 | 4,149 |
2022 | 119 | 3,494 |
2023 | 123 | 5,103 |
Source: VesselsValue |
The continued firm markets across the tanker sectors have been given a revenue boost by the disruption in the Red Sea and tanker second-hand values have climbed to the highest levels seen since 2008, according to Clarkson Research Services (CRS). It reports that its Secondhand Tanker Price Index at the end of February 2024 was 87% above the pre-Covid average and 74% above the average of the post-Financial Crisis.
The growth in values is plain to see in the benchmark VLCC sector, with CRS noting that it currently assesses a five-year old VLCC at US$111M, up two-thirds (66%) on the level three year ago.
This has a knock-on impact on the asset play for those who invested in VLCCs two years ago. A five-year old VLCC purchased two years ago, and operated in the spot market would have generated US$26M in earnings after OPEX. Assuming the five-year-old was purchased for the average price of US$70M, the same vessel is now valued at US$30M more. Earnings and rise in value produce an 80% return in two years.
These investment opportunities have not gone unnoticed and in 2023 over 120 VLCCs with a value in excess of US$5Bn changed hands – six times the amount of the 10 years before, according to VesselsValue data.
With so few VLCC orders placed in the last few years, there are only two VLCCs expected for delivery in 2024, which puts the demand for modern second-hand tonnage in perspective. But how long will it last? The flow of orders noted above has started again, but from a very low base, and the growth in order will be dependent on how many dormant yards can be re-activated and/or large slots converted to VLCC orders.
“In the first two months of 2024, crude tanker newbuild contracting surged to 7.4M-dwt, a 490% leap year-on-year, due to a rise in orders for very large crude carriers (VLCCs). A notable 19 VLCCs were ordered, already surpassing the number of orders for this ship type during all of 2023,” said BIMCO shipping analyst, Filipe Gouveia, in a report.
Poten & Partners warned in a paper in February 2024: “There seems to be more appetite for new orders, with several owners putting pen to paper at the shipyards, despite high prices and relatively long lead times. We are not in the danger zone yet, but an acceleration of VLCC ordering could put a sustained market recovery in jeopardy.”
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