Cleaves Securities has a pessimistic outlook for tanker values this year, following steep falls in 2020.
The Norwegian investment bank said secondhand numbers continued to slide in the final three months of last year, with Cleaves' tanker asset price index down 13% since the first quarter of 2020.
Cleaves is now assessing a VLCC resale at $88m, a fall of 15% since the peak in April.
A five-year-old ship is rated at $61.5m, also down 15%.
Both 10 and 15-year-old VLCCs have lost 19% of their values at $41m and $29m, respectively.
Cleaves sees another 6% downside to its asset price index towards the expected trough in the third quarter of this year.
The tanker orderbook currently constitutes 9% of the fleet versus the historical average of 21.3%.
"We expect that a low earnings environment, in addition to uncertainty over future regulations and technology, could keep ordering low going forward as well," analysts Joakim Hannisdahl and Peter Michael Christensen said.
Cleaves expects only 18m dwt of new ships to be contracted annually during 2021 and 2022, against a 28m dwt average from 2017 to 2020.
Prices at $415 per ldt
Scrap prices are currently at $415 per ldt, close to levels back in 2017/18 when there was a yearly demolition rate of 15m dwt.
Back then, a 15-year-old VLCC was quoted by brokers as low as $21m, leading to a valuation just $4m above scrap value.
"Our forecast is for 15-year-old VLCC asset prices to fall to $25m, which is just $8m above the current scrap value and should significantly induce scrapping," Cleaves said.
For comparison, the investment bank currently values a 2005-built ship at $29m, $12m above its scrap value.
Cleaves foresees an "elevated" level of scrapping in the coming years at 13m dwt in 2021 and 11m dwt in 2022, against just 3m dwt in both 2019 and 2020.
Scrapping was lower at 1.3m dwt in the final quarter of 2020, against the 2.9m dwt Cleaves forecast.
No extra cargoes
An expected slight increase in cargoes during the seasonally strong winter market did not materialise, bringing fleet utilisation to 76% in the last three months, down 3.5% quarter on quarter.
Tanker earnings averaged $7,672 per day in the quarter, down 30% from the third three-month period, and 83% over last year.
This was below Cleaves' $11,656 forecast from October.
VLCCs averaged $15,404 per day, a drop of 35% from the third quarter and 85% from the same quarter of 2019.
Suezmaxes managed $6,455, down 47% from the third quarter and 91% year-on-year.
