Scrapping of tankers on the cards

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Friday, 15 May 2009

Supertanker owners may scrap vessels in the next several months after rental incomes extended their decline, according to Halvor Ellefsen, a shipbroker at SeaLeague AS in Oslo. Owners who want to move their ships from the Middle East to West African, European or US markets are making no profit and have to contribute US$5,296 a day towards fuel and port costs, according to data from the London-based Baltic Exchange.
Should that persist, some owners are likely to start demolishing and idling ships within 'a month or two', Mr Ellefsen said.
The benchmark shipping cost, based on Saudi Arabian shipments to Japan, fell to 26 Worldscale points on Monday, the lowest in at least 11 years, according to the Baltic Exchange. Rates rose as high as 244.53 points in July last year.
Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes.
S Oil Corp, South Korea's third-largest refiner, hired the supertanker Symphonic for 25.5 points, Athens-based Optima Shipbrokers said in a report on Tuesday.
A rate of 26 points works out to US$3,798 a day, according to the Baltic Exchange.
Frontline Ltd, the biggest operator of supertankers, needs US$32,100 a day to break even on each of its ships once interest repayments are taken into account.
Source: Bloomberg