The dry bulk market seems to be bouncing along, the containership market
has been trading sideways, the product tanker market seems to keep attracting
ever more attention on the back of the shale oil developments in the US and the
bringing online of refineries in the Middle East, Indian and Asia, and the
crude tanker market has been left for dead.
The truth of the market is that the dynamics of the market, whether for
VLCCs, Suezmax or aframax tankers doesn't seem very inspiring. Smaller
quantities of oil will have to be transported in the future with the US less
dependable on imports and the Chinese positively discriminating in favor of
their own-flagged or –controlled tonnage. No great surprise that asset prices
for crude oil tankers have been in a free fall in the last few months, to say
the least.
In the last month, there have been a few transactions in the crude
tanker market that at the very least are noteworthy. The transactions refer to
modern tonnage, newer than ten years of age maximum, vessels coming from top
quality shipbuilders and also from sellers / managers / operators with solid
credentials, good ‘stables’ as we say in the business. Also, the buyers were top quality Greek
owners with solid track record of picking the bottom of the market, and having
made both by operating the vessels and also by playing the simple, old advice
of ‘buy low, sell high.’
A couple of the noteworthy transactions: American Eagle Tankers or AET for
short (a wholly-owned MISC subsidiary in Malaysia) just sold the VLCC MT „EAGLE
VIENNA” built at Hyundai Samho in 2004 to Alpha Tankers (Kanellakis) in Greece
for US$ 40 mil. The last comparable transaction in the VLCC market took place
at the end of May 2013 for the Mitsui-built and controlled MT „KAIMON II” to
interests of Altomare (Greece) at US$ 29 mil. The estimated newbuilding
contract of a VLCC is about US$ 90 mil with estimated salvage value of more
than US$ 20 mil, and an estimated economic life of 25 yrs. The steep depreciation line is obvious, but
the sale of the MT „EAGLE VIENNA” shows a relative improvement over the sale of
the MT „KAIMON II”; also, AET did well on the trade given that their VLCC
entrance was backed by multi-year COA to transport heavy oil (coiled VLs) for
PDVSA from Venezuela to Singapore for power generation and they have fully
recovered their investment.
Also, DSD of Norway seems to be in a divesting mode of modern, high
quality aframax tankers following the charter default of Sanko Shipping: the
2010-built at Sumitomo aframax MT „STAVANGER BELL” was sold to interests of
Eastern Mediterranean Maritime (East-Med controlled by Thanassis Martinos) in
Greece at reportedly $31.5 million, and a couple of weeks earlier, same seller
and buyers exchanged the 2004-built aframax tanker MT „STAVANGER BAY” at US$ 20
million. EastMed has a solid reputation
as a reference account of spotting market inflection points and buying
opportunities. A newbuilding aframax tanker would be priced at US$ 50 million
at present, so the level of the pricing and the discount thereof is apparent.
Estimated scrap price at present stands at about US$ 7 million. Of course, aframax rates are at about $13,000
pd with vessel daily operating expenses at US$ 8,000. No much room for leverage, but definitely
cash flows are positive; the vessels are very good quality and under good
management, and theoretically 15+ years remaining economic life.
Strangely, neither Alpha Tankers nor EastMed have bothered with the hot
product tanker market for acquisitions, and most definitely have not bothered
with equally good vessels older than ten years of age.
This is a bifurcated market, but the smart money seem to show the way…
©
2013 Basil M Karatzas &
Karatzas Marine Advisors & Co.
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