BIMCO: 500 days since last VLCC was sold to scrapyard

Oct 29, 2020

BIMCO: 500 days since last VLCC was sold to scrapyard

On 2 November 2020, it will be 500 days since the last very large crude carrier (VLCC) left active service when it went on its final journey from Jeddah to Bangladesh for dismantling, according to BIMCO, the world’s largest shipowner association.

The 1999-built Watban was owned by Bahri, the national shipping carrier of Saudi Arabia, data provided by VesselsValue’s shows. Sold at $440 per ldt, the Japanese built Watban contained a lot of steel and brought $20.8 million to its owners.

As explained, strong crude oil tanker market earnings from August 2019 through July 2020 have evaporated any interest in demolition sales.

By end-October 2020, spot freight rates for all oil tankers sit at a loss-making level for owners and operators.

The 500 days is the second-longest streak without any demolition sales of VLCC crude oil tankers since 2009.

“Shipowners are die-hard optimistic people. This explains why the tanker market can stay low for a long time before anyone decides to call it a day and sell their ship for scrapping,” Peter Sand, BIMCO’s Chief Shipping Analyst, commented.

Today, candidates for demolition sale contain less steel than Watban and the steel price in Bangladesh is $360 per ltd., bringing in around $15 million for an average VLCC.

It took an oil price nosedive in the second half of 2014 to fuel solid oil tanker market earnings. In 2019 and 2020, geopolitics and the COVID-19 pandemic have driven of earnings higher. In both cases, higher earnings capped the incentive to demolish.

Courtesy of BIMCO

“Any dead cat bounce during the coming winter season is likely to postpone a large scale cut in the active fleet. Since the last demolition sale, 57 newbuilds have been delivered, contributing to a fleet growth of 52% since the start of 2011,” Sand said.

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BIMCO: A look into 2020 fleet growth

  • Vessels
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