French orders to foreign shipyards

their specifications and their SBT (Segregated Ballast Tanks)
navigational capabilities . For example, M/T “Presidente
Rivera”, 87,325 dwt, that was built in 1981 went for
$5.15 million, while M/T “New Ideal”, 97,789 dwt, also
built in 1981, sold for two million dollars more.
Several vessels built in the mid-eighties also changed
hands, including the M/T “Hakuyo Maru”, 89,960 dwt,
built in 1987, which sold for $15.5 million and the M/T
“Sentinel”, 106,650 dwt, built in 1986, and sold for
$14.25 million. Only three ships built between 1977 and 1979
were sold, reaching or slightly surpassing the $4.5 million
level.
Scrapping remained active throughout the year, with
thirty ships departing for the scrapyards between the
beginning of the year and mid-November. However, this
figure must be compared against new deliveries to
the fleet in the period, which already exceed it by ten.
Panamax tankers were of little interest to shipowners this
year, with only five vessels changing hands compared to
eleven last year. The main reason for this is that earnings
for this category are so low. For the record, the M/T “Prestige”,
68,337 dwt, built in 1989, brought in $15.75 million
with 12 months of back charter, and the double sale of
the sisterships M/T “Affinity” and “Spirit”, 66,726 dwt,
built in1979, garnered a total price of $7 million. Only
two or three units were scrapped during the year.
• The combined carriers (OBO) second-hand market
Nineteen ships were sold this year, 15 of which for scrapping.
The two vessels “Probo Bani” and “Probo Baoning”,
47,980 dwt, built in 1989, were sold together for a total
price of approximately $30 million with two years of
charter back worth $14,000/day. The “Kapitan Sokolov”,
53,700 dwt, built in 1983, secured $7 million and the
“Peregrine X”, 135,160 dwt, built in 1983, was sold “as is”
for $6 million.
Ultimately, not many ships in the above-cited classes
were exchanged. The year will end without any perspective
of significant improvement in either freight rates or value
in the short term.
Is there any correlation in this? It would probably be
understating the complexity of this market to give more
weight to the role of shipowners than to that of charter
companies, financiers, shipbuilders, scrapyards and brokers.
The fact remains that when shipowners consider newbuilding
orders, it seems that very often the second-hand
market option is neglected. Owners should get a better
grasp of the availability of ships in the existing fleet and
of vessels under construction coming up for sale, for
resale or for lease. They would thus be able to find an
equally acceptable option in terms of time and cost.
Should shipowners act in this manner, a dual benefit would
result through the removal of one ship from the spot
market thus improving freight rates and at the same time
a further burdening of an already top-heavy fleet would
be avoided. The end result would be to improve the
chances of arriving at supply and demand equilibrium in
the market.
It may sometimes be appropriate to seek a choice of
vessel from among the numerous speculative newbuildings
that have arisen over the last years. Speculative
orders should not be disparaged; on the contrary, they
could result in the creation of a pool of reserve tonnage
available to shipowners for responding to situations that
arise. Better fluidity in the market would be another
benefit, with owners’ roles stabilising or changing into
industrial shipowners, tramp owners or purely speculative
owners.
The transport of refined products
As we foresaw, 1999 was worse than mediocre for
shipowners in the refined product transport sector. This
was due to the worsening of the existing imbalance of
a growing fleet of ships and a flagging transport demand.
Industry fundamentals were better than could have been
hoped, due to:
• Sustained growth in the US economy.
• An acceleration of European growth.
• A receding Asian crisis.
Still, the market was adversely impacted by internal factors:
• Large delivery capacities of modern ships.
• The shortening of routes due to new refineries coming
on line, especially in India.
• Mergers and restructuring in oil companies.
Despite the fact that shipowners’ operating costs have
increased due to the surge in bunker oil prices, they have
nonetheless continued to order new vessels, banking on
an exceptionally favourable combination of historically
low construction prices and interest rates.
The question remains whether these financial considerations
have not overshadowed the risk that the market may not
be able to absorb additional new tonnage in 2000 and
2001.
Fundamental factors
• Faltering demand
The increase in refinery capacities in the Far East, which
was predictable, has begun to have an effect. India will
now be refining 50% of the 2 million barrels per day
increase in Asian capacity between now and the end
of 2000. This has caused a distinct reduction in that country’s
diesel imports. China’s refining capacity will increase
by 645,000 barrels per day by the end of 2000 with
Formosa Petrochemical (450,000 barrels per day) coming
on line by early 2001. In fact, Asia should become a net
exporter of refined products from late 2000 to early 2001.
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