Discussions in the secondhand VLCC sales market have intensified over the past fortnight, yet few deals were actually completed amid strong, but volatile, trading conditions.
According to market sources, prices for secondhand VLCCs have been discussed at higher levels across various age groups, following recent spikes in spot earnings — yet many potential sellers are hesitant to sign contracts in anticipation of further increases in asset values.
'Dangerous' times
“It’s very dangerous to do a deal in the middle of a spike,” said Euronav chief executive Hugo De Stoop, whose company has done some of the biggest transactions in the tanker spectrum this decade. “Even if you are a seller, you don’t know how high it can go.”
Based on Clarksons’ assessments, the resale price of a VLCC newbuilding is $100m compared with $96m at the end of September. A five-year-old vessel's value has risen from $71m to $75m over the same period, a 10-year-old ship has increased from $46m to $52m and a 15-year-old tanker from $32.5m to $38m.
“No seller wants to sell too soon and miss out on what could be. Whilst at the same time, buyers are reluctant to pull the trigger and set new benchmarks in case this proves to be short lived,” shipbroker Galbraith's said in a note.
Hartree sale
Brokers and tanker market sources told TradeWinds that Hartree Maritime Partners has sold the 300,000-dwt newbuilding Ghillie for $103m in a deal that expected to raise price expectations. A comparable deal was done at $98m in June.
But it is not certain who is the buyer of the ship due for delivery from DSME in January, or whether the deal will be finalised. Pan Ocean has denied its involvement while some local sources named Hahn & Co as the possible purchaser.
A lot of oldies are looking for their lottery ticket on the selling front
London-based broker
A London-based broker suggested the owners of modern tonnage were more keen to hold on to their assets. At the same time, he said: “A lot of oldies are looking for their lottery ticket on the selling front.”
Varde Partners is reportedly selling the 319,000-dwt Energy R and Power D (both built 2003) at somewhere between $32m and $35m each. This compares with offers of $28.5m reported a quarter ago.
NGM purchase
TradeWinds is told that Greek Moundreas family company NGM Energy has bought the Energy R in the latest bout of a string of busy sale-and-purchase activity for the Piraeus-based outfit. Market sources also said talks to sell the Power D have not concluded yet, with the vessel being negotiated for as much as $36m.
At the same time, Winson Group’s 312,000-dwt Winson No. 5 (built 2001) and Phoenix Tankers’ 302,000-dwt Phoenix Vanguard (built 2007) are up for sale, as well as the 281,100-dwt Tenyo (built 2000) jointly owned by NYK Line and Thai Oil.
Potential sellers have generally hiked their asking prices by at least 10% from the month-ago levels, unafraid of rejecting offers as there are lucrative employment opportunities in the spot and period markets.
Having briefly spiked above $300,000 per day on 11 October, VLCC earnings remain at a strong $80,000 per day this week. One-year charter rates have risen by at least 50% over the past month, according to Poten & Partners.
Many tanker players have forecast strong freight earnings in the coming months, with IMO 2020, seasonal oil demand and geopolitical tension supporting market sentiment.
However, Bimco chief shipping analyst Peter Sand has predicted the crude tanker fleet will grow 5.3% this year, creating a supply overhang that would dampen earnings prospects later on.
“Our analysis points towards fleet growth, which exceeds demand growth for the year 2019,” Sand said. “That means the increased ... tonnage will affect rates in a downwards direction.”
Selling now while the spot market is high may be taking advantage of a window of opportunity.
Harry Papachristou, Irene Ang and Lucy Hine contributed to this article
