A leading London broking house warns
The IMO’s Water Ballast Convention (WBC) impact on shipping will be enormous, particularly for tankers, a leading London broking house has warned.
For example, Wartsila Water Solutions recently said that fitting a VLCC with the required equipment ‘can currently put an owner back as much as $8 mill’ and further stated that the technology is relatively untested.
Another problem will be the huge number of tankers (and indeed other vessel types), which will need systems installed, Gibson Research said in its latest weekly report.
The International Chamber of Shipping has suggested that over 20 vessels per day will need to have systems installed to meet the convention, which will require all ships be fitted with ballast water management systems by mid-2017.
According to one major class society, at present there are only 17 approved BWT systems on the market and concerns have also been raised about the availability of equipment for ships with large ballast water requirements.
The new regulations will also generate an enormous amount of work for shiprepair yards as owners jostle for slots tied into their class survey dates.
Given the recent trading conditions, the rapid fall in asset values and spiralling bunker prices, early implementation of the WBC could provide the springboard to scrap first generation double hull tankers 15 years of age and older, Gibson said.
Recent sales of VLCCs for recycling has generated returns of around $20 mill, at the same time the secondhand price for a 15 year old VLCC has fallen to around $24 mill and may continue to head south as the supply of new tonnage goes unabated and charterers show preference for younger tankers, the broker warned.
In any business timing is everything. Once the WBC enters into force, expected to be next year, owners will be taking a critical look at their survey position and will have to decide if the additional expenditure, as well as the drydocking/repair costs and more offhire days is worthwhile.
It is always a difficult decision for an owner to scrap a ship. However, the tranche of impending regulations may prove to be too tempting if the differential between secondhand and scrap price continues to narrow and a much faster removal of more elderly ladies could be seen, Gibson said.
Gibson said that perhaps the Frontline proposal back in August to scrap 60 double hull vessels built in 1996, or earlier, has more merit given the emergence of more regulation and more costs!
Thus far, 30 required IMO member states representing more than a quarter of the world’s tonnage have signed the convention and it is believed that Panama will shortly add its signature, which will take the requirement well beyond the 35% of the global fleet needed for implementation.
Source: EA Gibson