Single-hull numbers fall to 7% of fleet

Even as the UAE gears up to ban all single-hull tankers by the end of the year, their number has decreased drastically while demand from countries with inland transportation has increased.

The number of single-hulls in the market has dropped to almost seven per cent of the total fleet and 2010 would be the right time to scrap the ships, according to a recent report published by McQuilling Services.

The phase-out of single-hulled vessels has been pushed forward by the International Maritime Organisation (IMO) after the Prestige and Erika oil spills. The regulation requires tanker owners from IMO-member states to stop operating single-hull vessels by the end of 2010, while vessels built with a double bottom and single sides can continue trading until 2015.

The IMO's regulation 13G calls for single-hulled tankers to be phased out in 2010 by the anniversary dates of their delivery. However, an amendment, regulation 13G(7), allows these same vessels the opportunity to trade to 2015, but only after the successful completion of a Condition Assessment Scheme (CAS) which is applicable to all single-hulls of 15 years or older.

Even with successful CAS certificates in place, the IMO 13G(8) regulation grants flag states their own rights for controlling access. "In many cases, major tanker ports around the globe have already indicated that 2010 will be the final year in which they will allow single-hulls to call at their ports, regardless of a vessel's CAS status," said the McQuilling report.

In a recent notice issued to agents and bunkering officials, Capt Tamer Masoud, Harbour Master at Fujairah Port, said: "Single-hull tankers that are still not phased out, are permitted for cargo operation, subject to submission of documents as per our Notice to Mariner No 84." Notice 84 states that in order to accept single-hull tankers at the Port of Fujairah, it is essential for the vessel to have satisfactory results from the CAS for single-hull tankers of age 15 and more, and to obtain necessary permission from the flag state for continued operation of single-hull tankers.

The latest notice adds phased-out single-hull tankers are allowed to call at the Fujairah Offshore Anchorage Area in ballast condition to receive primary requirements and should leave the area immediately on completion of aforesaid services. Phased-out, single-hull tankers are, however, not allowed to wait for orders.

However, the UAE has already made its stand clear that no single-hull vessels will be allowed into any of the country's ports after 2010. Emirates Business has published, way back in 2008, statements from Badreya Ahmed Al Dhahri, Director of the Marine Affairs Department at the National Transport Authority (NTA), as saying: "We are streamlining our regulations and have made it clear that no single-hull tankers will be allowed to trade in the UAE after the 2010 deadline."

Bloomberg quoted Harbour Master Masoud in November 2009, saying: "Our policy is clear. No single-hull ships will be allowed in the port or anchorage area from January 1." Fujairah serves as the main ship servicing point for vessels sailing between Asia and the Atlantic Ocean via the Arabian Gulf.

Meanwhile, the McQuilling report said that with the impending IMO 13G regulation calling for the phase-out of single-hulls this year, the expectation has been that 2010 will be 'the year of the exits'. Since January 2009, the very large crude carrier (VLCC) fleet has dropped from 96 single-hulls (19 per cent share of the fleet) to only 36 (seven per cent share) at present.

Some companies have reported that they are getting requests from countries around the world where owners want to utilise single-hull tankers in their territorial waters for transhipment purposes. The report said current market conditions were not that bad for companies wanting to scrap their ships. "If it is time to go, perhaps now isn't the worst time to scrap a ship." Demo prices for tanker tonnage have risen rather steadily since 2009 after dropping to $250 (Dh918) per light displacement tonnage (LDT).

"The market is seeing a new high point for 2010, with China paying $435/LDT in May for the VLCC Shinyo Mariner. Average scrap prices of $413/LDT this year are up by 49 per cent compared with $278/LDT seen during the same period in 2009. For a typical VLCC, today's scrap price leaves a parting owner with more than $14 million. This is hardly a figure to ignore in the face of surmounting difficulties for continued trade of a single-hull," it said.

It said Bangladesh remained the most popular buyer of wet tonnage, taking 56 per cent of tankers scrapped this year at $408/LDT on average. India and Pakistan make up the gross majority of other breakers collecting tonnage, with Chinese yards expanding their participation in the demo markets as of late.

"It is interesting to note the high price being offered by Chinese breakers this season, who typically quote among the lowest of scrap rates. This is not the first time that China has offered premium prices on scrap, and it will probably not be the last. Typically, these price-cycles fall back down once China's prompt demand for scrap steel has been appeased," it added.

With only 36 VLCCs left in the single-hulled fleet – 63 per cent less than just an year ago – the industry, the report said, may have already seen a drastic change in the way charter rates are negotiated.

"Though this list is thinning, there have always been charterers willing to accept the risk of fixing a single-hulled ship, albeit at some discount to more modern, double-hulled vessels. And with singles losing both their volume and trade-ability, owners of newer tonnage may be more at ease knowing that charterers are losing the discounted option," it said.

As for the remaining single-hulls, the report said: "Some will trudge ahead, paying for dry docking repairs and CAS expenditures before the year is up. In fact, one could argue that the last few singles floating should do quite well given the scarcity of their kind. But many will opt not to take on these expenses, particularly as today's single-hulls face 40 per cent fleet utilisation and discounted freight rates at that."