The years of massive fleet renewal are at an end

Most UAE fleets are now complete having been built on a massive investment in newbuildings that centred on product, chemical and VLCC tonnage. Most of these vessels were ordered in the boom at inflated prices and this factor, coupled with entry into today’s low markets, has taken its toll on earnings and cash flow.

Gulf Energy Maritime (GEM) will take delivery of Aframaxes Gulf Vision and Gulf Valour towards the end of the year. These vessels were contracted for US$80 million each in March 2008, and are the last in an expensive newbuilding drive which has seen the fleet grow to 19 vessels covering Handysize, IMO II and IMO III medium range, and long haul LR1 and LR2 product tankers. Although expensive by today’s standards, the two LR2 Aframaxes at 115,000 dwt will be the largest in the GEM fleet, and the company along with other Middle East owners has never been afraid to pay higher prices for premium ships. The Aframaxes will be fully coated for transport of dirty and clean products, offering flexible earnings potential in changing global trades.

Gulf Navigation Holding PJSC has been listed on the Dubai stock exchange since 2007. It holds the distinction of being the only company on that exchange listed a year after its intial public offering. Eight IMO II chemical tankers and two VLCCs make up the fleet. In 2009 Gulf Navigation Holding PJSC’s search for an experienced partner resulted in a joint venture with Stolt Tankers. Gulf Stolt Ship Management was founded to undertake operation of the whole chemical tanker fleet. Four of the vessels come under joint ownership of the two companies.

A significant change earlier this year was signalled by the National Shipping Co of Saudi Arabia (NSCSA) becoming more commonly known as Bahri. The business aims to rank by fleet size among the top ten VLCC owners and top five chemical operators in the world. Thirteen chemical carriers were already in the NSCSA fleet subsidiary National Chemical Carriers (NCC) based in Dubai. The latter also operates an equal joint commercial partnership with Norwegian owner Odfjell to operate the fleet out of Dubai. A large newbuilding programme is still under way after running into problems when SLS Shipbuilding, South Korea went under in the shipbuilding crash.

SLS Shipbuilding has been reconstituted as ShinaSB Yard Co, and renegotiated terms will see delivery of the remaining five of a nine ship order for 45,000 dwt chemical tankers, which will give a boost to fleet strength in coming months. The first, NCC Shams, was delivered into the Bahri fleet on 29 May. In addition to this order, Bahri and Odfjell have each ordered a 75,000 dwt IMO II chemical carrier from Daewoo Shipbuilding & Marine Engineering. The vessels have 31 tanks, making them the largest vessels of their type in the world. Options are attached by both owners for two more from Daewoo. NCC is a subsidiary of Bahri and the Saudi Basic Industries Corporation (SABIC) on an 80:20 basis. The delivery of NCC Shams lifts the chemical fleet to 21 units.

Vela International Marine recently disposed of its last single hull VLCC for conversion to an FPSO. The company took full advantage of the high prices available for vessels suitable for FPSO conversion or recycling. It is now left with a modern VLCC double hull fleet numbering 14 units. This is complemented by five product carriers performing coastal voyages in the Red Sea and Arabian Gulf. Vela International Marine is a subsidiary of Dharan-based Saudi Aramco and is one of the biggest charterers of VLCC and product carriers with as many as 50 vessels under its operation at any one time.

United Arab Chemical Carriers (UACC) returned to ShinaSB Yard Co., in renegotiated business. Ten high specification Marine Line tank coated 45,000 d.w.t. chemical tankers were originally contracted in 2007 at US$61 million apiece to mark UACC’s debut in the chemical sector. In keeping with the growth of UAE fleets UACC already operates twelve medium and long range products carriers now capitalising on improving markets.

UACC always wanted delivery of the ships as they will work the company’s own COA business in the Indian Ocean, Arabian Gulf and Red Sea regions. The vessels were seriously delayed by financial problems at ShinaSB (formerly known as SLS) and in the renegotiated deal UACC has secured a per unit price of only US$37.5 million – a saving of US$23.5 million.

The first two and last two ships were originally cancelled but UACC is now confident that all ten ships will be built under new contract terms. The high grade ships will incorporate 22 tanks enabling transport of a wide range of IMO II hazardous chemicals. Deliveries will now all be completed by 2013 although the third and fourth ships have been resold to Norway’s Odfjell at US$36.75 million each. Late delivery performance will yield penalty payments to UACC but the remaining six ships, while bargains, may not be as much reduced in contract price.

Satisfactory in service performance is liable to persuade UACC to order more ships as chemical expansion is a cornerstone in its future business growth. UACC is a division of parent United Arab Shipping Company having been relaunched in 2007. TST