This week, DHT Holdings ordered two VLCCs at Hyundai Heavy Industries at what is rumoured to be the cheapest

contract price recorded in 14 years. The company has so far declined to release official prices for the two newbuildings,
but talk in the market suggests around $81m per vessel. 2016 saw values for secondhand VLCCs fall off a cliff and
DHT’s rumoured low contract price will further pressure asset values. Twelve months ago, the Baltic Exchange valued
a five-year-old, 305,000-dwt VLCC at $79.4m. On Monday, the benchmark vessel was assessed at $59.23m,
a 25% decline.
But, as we have seen with bulk carriers, the secondhand market has come alive with buyers snapping up VLCCs at
bargain-basement prices. This week, Greece’s Olympic Shipping reportedly picked up two VLCC resales from
Metrostar at a price of $81m per ship – around the same price as DHT’s newbuildings, but without the waiting time!
In 2017 so far, we’ve tracked the sale of 7 VLCCs (including 3 deals still on subs). This is a huge proportion
compared to the 24 VLCC sales transactions we logged during 2016.
Some institutions consider that depressed asset values are a good thing for the VLCC market because they disincentivise
new ordering. Indeed, during 2016 we logged orders for just 17 firm VLCCs, compared to 57 in 2015.
DHT is the only firm to have ordered new VLCCs this year. Trygve Munthe, the company’s co-chief executive, this
week commented that his company “would not expect a large flurry of similar orders to be placed”, despite the
apparently attractive contract prices.
Looking at market data, it might be prudent for owners to hold off ordering new VLCCs for a little while longer. Although
the VLCC charter market had its highlights during 2016, its potential could be dulled this year. Fleet utilisation
is expected take a big hit this year as many new VLCCs hit the water. Some 52 vessels are scheduled for delivery in
2017 – equivalent to 7.3% of the global fleet in terms of number of vessels. Thirteen new VLCCs have already
been delivered.
We’ve seen a few VLCCs sold for conversion into floating storage and offloading (FSO) units over the past couple of
years and we expect to see a few more such deals, but it remains unlikely this will affect utilisation of the global trading
fleet. Only four VLCCs have been sold for demolition during the past two years. We’ll probably see a few more
this year, but for the most part scrapping won’t be part of the VLCC conversation because net fleet growth is still
relatively low.

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