The lack of available tonnage from tankers “trapped” in the Persian Gulf, as well as the changes this development has brought to oil trades, which entail a significant increase in ton-miles, have driven freight rates to historic highs both in the spot market and for period charters.
With freight rates remaining at historic highs for approximately two months, the values of quality tankers of all types have come to exceed the average order price of a comparable tanker, which however will be delivered approximately three years from now.
According to data from Signal Ocean, analyzed by senior analyst Maria Bertzeletou, today the average newbuilding price of a super tanker, capable of carrying about 300,000 tons of crude, reaches $129 million, while a five-year-old vessel is worth $138 million on the market.
Only the resale, i.e., the purchase of a newbuilding contract, is more expensive, reaching $174.5 million today.
However, it is not only the values of active VLCCs that have risen to unprecedented levels. The prices of suezmaxes, i.e., tankers carrying 150,000 tons of crude, are now at the same level whether a company places an order or buys a five-year-old vessel.
Regarding aframaxes, Signal’s data show that five-year-old vessels are also more expensive than a new order by $1.6 million.
In fact, according to an examination of data by “N”, in the sector of aframaxes carrying 115,000 tons of oil, even eight-year-old ships have prices comparable to the average new order price.
For example, in the /LR2 market, where the sister ships Southern Reverence and Pusaka Borneo, Japanese-built in 2018 and of approximately 108,500 dwt capacity, changed hands for $75 million and $76.5 million respectively.
That is, eight-year-old ships were sold at levels equal to or higher than the average order price of a newbuilding in the same category, which is placed at around $75 million.
As Ms. Bertzeletou characteristically states in her report, since the end of February, the rise in values in the VLCC market had been recorded, and simultaneously the shrinking of the so-called “age discount” was evolving, resulting in a reduction in the price difference between five and ten-year-old ships, a fact that reflected the increased interest of buyers for middle-aged vessels.
Today, after more than 60 days of disruptions in the Strait of Hormuz, the market picture has changed even further, to the point where the traditional curve of value depreciation due to age appears to have essentially collapsed.
Under normal market conditions, a resale enjoys only a limited premium due to the shorter delivery time, while a five-year-old tanker usually trades at a clear discount compared to a newbuilding.
Today, none of these conditions apply. Five-year-old VLCCs trade approximately $9 million higher than comparable newbuilding contracts, while suezmax values move essentially at the same levels as newbuildings, and aframaxes have also moved to a premium over newbuildings.
In the resale market, buyers are paying a premium of the order of 21%-35% above newbuilding prices, a fact that translates into an additional cost of about $45.5 million.
dollars only for one VLCC, exclusively due to immediate availability.
Current monthly freight indices record a 34% drop, but the year-on-year increase remains strong, reaching 78%.
Despite the fact that net capacity supply has been on an upward trend since mid-April, this has not yet led to a substantial market correction.
However, the rapid accumulation of vessels in ballast condition may exert greater pressure on the market in the coming period.
Examination of net supply trends over the last 15 days shows that the West Africa TD15 route is on a downward trajectory.
For the freight market, the impact is not so much linked to a complete disruption of global oil flows, but rather to the severe distortion in vessel availability and particularly in trading patterns caused by the de facto two-way blockade of the Strait of Hormuz.
The combination of transit restrictions, the unresolved risk from mines, the significantly increased war risk premiums, and the absence of reliable freedom of navigation has effectively excluded a significant portion of the international tanker fleet from operating in the region.
As a result of all this, the redistribution of vessels from the Persian Gulf to the Atlantic basin is accelerating, thereby strengthening the role of the US Gulf as a key marginal supplier, particularly towards the Asian region, while simultaneously significantly increasing ton-mile demand.
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