Firm S&P market hides wide price disparities

The sale and purchase market in the first half of 2020 has been relatively firm, with 302 tankers sold in the second-hand market versus 244 in the first six months of 2019. Still, the first half of the year has been one of the strangest in living memory with a spike in tanker earnings, a rush to fix vessels for storage and the crude oil price turning negative.

The increase in overall tanker sales has been driven by a firmer market and a more favourable outlook. Looking specifically at S&P activity in May and June 2020, it is clear that canny owners took the opportunity to dispose of older tonnage that had been languishing at the bottom end of their long-term values.

A case in point was the sale of a pair of VLCCs for further trading by Ridgebury Tankers, a company with a fine reputation for operating well-preserved, older vessels. The 2000-built, Samsung constructed VLCCs Ridgebury Progress and Ridgebury Purpose were sold to unnamed Chinese buyers for a reported US$24M each (source VesselsValue).

Both of the VLCCs had been purchased in June 2015, for around US$34.6M each in an en bloc deal from Independent Tankers Corp, a Bermuda-registered company associated with the John Fredriksen group of companies; both had been on charter to BP Shipping.

The S&P market weakened sufficiently in 2018 for VesselsValue to actually quote the two Ridgebury VLCCs at demolition values for several months. Since then the market has firmed and it would seem that Ridgebury Tankers has struck an S&P deal at the right time to avoid the potential expense of demolition. The vessels have also been purchased with Special Surveys due, another financial saving in Ridgebury Tankers favour.

On the newbuilding side, four VLCCs were contracted in May and June 2020: two are for the account of Chinese buyers at a Chinese yard at a reported price of US84.5M. The other pair of VLCC newbuildings were ordered at Hyundai HI in South Korea by Evangelos Pistiolis’ Central Mare of Greece. Greek buyers were responsible for 12 of the 44 tanker orders placed in May and June 2020.

The main Greek interest was in the Suezmax sector, with CM Lemos’ Nereus Shipping placing contracts for four 160,000 dwt tankers split between Hyundai HI and Hyundai Samho. The reported price was US$61.45M.

Hyundai HI has also won an order for two firm and two options 157,000 dwt Suezmax tankers from Sonangol, the Angolan public sector energy company. The reported price is US$57M per vessel.

This contract came to light around the same time as it was reported that Anna Angelicoussis’ Pantheon Tankers had placed an order for a pair of 158,000 dwt Suezmax tankers at the privately-owned New Times Shipbuilding in China, for US$51M each.

“It seems hard to believe that in the 1970s Brazil was a major shipbuilding nation”

Viken Shipping placed a corresponding order at the same price at the same yard and fellow Norwegian operator Ludwig Mowinckels Rederi placed a contract for four similar units. Ludwig Mowinckel currently operates one Suezmax tanker and two bulk carriers and the new orders represent a resurgence for the 122-year-old shipping company.

The above contracts highlight the wide range of prices reported for the Suezmax tankers ordered. The reported price of US$51M from New Times Shipbuilding is markedly lower than the US$61.4M reported for the Hyundai vessels. The prices reflect differences in specification.

The May and June 2020 demolition market also featured some interesting sales. Transpetro of Brazil sold the 1997-built double hull MR2 tanker Livramento for recycling for a reported US$195/ldt. This represents a steep fall from the last conducted sale of an MR2 product tanker, which sold in February 2020 for US$360/ldt. The Covid-19 pandemic has clearly impacted the sale price, as have the ‘as is’ terms of the sale.

The Livramento’s claim to fame is that it is (or was) the last surviving tanker built in Brazil at the Japan/Brazil shipyard joint venture under the name Ishikawajima do Brasil Estaleiro. Ishibras, as the yard was generally known, was a joint venture between IHI of Japan and the Verolme shipyard in Brazil.