18.05.2008 - VLCC orders surge

Strong tanker rates have prompted a surge in newbuilding orders for VLCCs so far this year, according to shipbroker Gibson.

A total of 51 VLCCs have already been ordered so far this year compared to only 35 for the whole of 2007, it says.

“April proved an extremely strong month, with 22 VLCC orders placed, but the 51 orders so far this year make up 25% of the VLCC orderbook,” Gibson says.

“Given the current strength in earnings and market expectations, it is no surprise that there has been a surge in orders.”

So far this year VLCC earnings have average close to $110,000/day with current earnings at $175,000/day this is a 140% increase compared with January to May 2007.

Gibson says Iran’s temporary use of VLCCs as floating storage for its heavy crude oil has certainly helped push rates higher at a time of year when rates would normally fall.

“With forecast further growth in long haul crude trades and the ongoing pressures to switch to double hulls, the market prospects for VLCCs appear strong for some time to come,” the broker suggests.

While the order escalation has only been seen in the VLCC sector Gibson says it may be only a matter of time before we see more new orders for Suezmax and aframax tankers.

The broker concludes that: “The age old adage of ‘when rates are high, new orders are high’ is again proven to be correct.”

Dale Wainwright, Tradewinds

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