Volume 3, issue #11 - 03-04-1998

Feb. 24, 1998 One of the largest players in the newbuilding market has dismissed fears that the current order book could cause a repetition of the tanker over-ordering in the 1970s.
Robert Knutzen, president of Golden Ocean Group which has 15 VLCC's on order, said there was nothing scary about the current VLCC order book, contrary to the opinions expressed by his colleagues.
Tony Allen, Golden Ocean's chief financial officer, agreed and pointed out that there were only approximately 70 VLCCs on order and 15 were set for delivery this year, 30 for next year and the excess would be delivered in the year 2000.
In comparison, 118 VLCCs were delivered in 1975 at the height of the newbuilding boom in the seventies and shipbuilding capacity had changed since the 1970s, Mr Allen said.
He added: "The shipyards that produced the ships in the seventies, especially in Sweden, are not around anymore and the capacity at Korean and Japanese shipyards has been reduced due to the financial crisis in the Far East."
Demolition figures must also be taken into account when looking at present newbuilding figures.
Clarkson's have estimated that 3.2 mm tonnes would be scrapped in the VLCC market this year, Mr Allen said.
In reaction to the concerns expressed within the industry that shipowners ordering new VLCCs without the commitment of future cargoes were primarily speculators, Mr Allen hit back at owners of older tonnage. He said they were also speculators in thinking that they would be able to recoup investments in a short space of time that were spent meeting special survey criteria. In the past, oil majors had enjoyed unlimited credit which fuelled the huge VLCC ordering of the early seventies.
He added that a repetition would not be possible as VLCC tonnage controlled directly or indirectly by the oil majors in the 1970s amounted to 80 % against a current figure of less than 20 %.
"Today oil majors own fewer vessels, they time charter fewer vessels. They are heavily dependent on the spot market and will increasingly make use of consecutive voyage charters and contract of affreightments (COAs)," Mr Knutzen said.
He added that the change in structure will mean less access to funding by owners without long-term charterers and a growing consolidation of both ownership and commercial management of the VLCCs required to meet the needs of the oil majors.