Japan sees upturn in VLCC business

Apr 26, 1997 02:00 AM

Japan's shipbuilders are becoming increasingly confident that long-awaited VLCC business is coming to fruition after receiving orders for 13 VLCCs in the four months from November 1996 to the end of February this year. This compares with the period between January and December 1996 when orders were placed for 17 VLCCs, of which Japanese shipbuilders received 10 while 7 went to South Korea. Furthermore, negotiations are in progress for the construction of an additional 27 VLCCs.
Orders placed in the four-month period comprised 2 from Chevron for South Korea, 1 from Greece's Niarchos Maritime for South Korea, 2 from Seatankers of Scandinavia for South Korea, 4 from Golden Ocean Group - 2 each of these for Hitachi Zosen and Mitsubishi Heavy Industries, 3 from Mitsubishi Oil for Mitsubishi Heavy Industries and 1 from Iino Kaiun Kaisha for Ishikawajima-Harima Heavy Industries (IHI).
Some 430 VLCCs were in operation globally as of February, of which 221 were above 20 years of age. But the builders are citing Australian port state control rules which ban entry into Australian ports by vessels aged above 20 years and the fact that the US is tightening regulations on single-hull tankers.
Forty-two VLCCs were scrapped in 1995 and 6 in 1996. Against this background, seaborne freight rates are rising.
IHI has received contracts for the construction of 5 VLCCs in the past 2 months or so, with delivery dates running to 2000. Hitachi Zosen has 8 VLCCs in its orderbooks while Mitsubishi Heavy Industries has enough VLCCs on order to occupy its building docks until the end of 1999.
In 1990, Hitachi Zosen offered a maximum of Y 14 bn ($ 113.2 mm) for a VLCC order. Since then, prices have fallen thanks to the initiative of South Korean builders, reaching Y 8 bn in the latter half of 1994 and in 1995. They started to pick up again at the beginning of 1996 and hit the Y 9 bn mark in February. The Japanese builders also base their optimism on the fact that South Korean shipbuilders have enough workto keep their yards busy until the end of 1999.
Meanwhile, outlining its strategy for fiscal 1997, Sumitomo Heavy Industries has confirmed it intends to place emphasis on VLCCs, panamax bulkers and Aframax tankers. Takaji Nakanishi, general manager, Ship & Steel Structure group, and managing director, Sumitomo Heavy Industries, said the company had completed a building dock measuring 560 m by 80 m wide at Oppama shipyard. It was now capable of building three vessels at the same time with annual capacity to build 12 Panamaxes. Mr Nakanishi said the building period could be shortened as fitting work could be done at the dock.
Sumitomo Heavy Industries had allocated a total of Y 1.7 bn to equipment investment in 1997, including some Y 1 bn for the renewal of welding systems and maintenance of cranes. To reduce costs, Sumitomo Heavy Industries has launched a shipbuilding computer-integrated manufacturing system with the newly-developed third-dimensional designing/manufacturing system Sumire.
Japanese shipbuilders received orders for the construction of 19 panamax bulkers to the end of March.
A total of 83 panamax bulk carriers was ordered in 1995, and 75 vessels in the period from January to August 1996. The panamax boom appeared to have ended last autumn but sources said the negotiations gained momentum since March last year.

Source: not available
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