VLCC conversions keep tankers away from ship breakers

According to Clarkson Research Studies, the strength of the cape size dry bulk market, driven largely by surging seaborne trade in coal and iron ore, is encouraging owners of single hull very large crude carriers to convert them into iron ore carriers or offshore storage units, rather than sell them for scrap. Clarkson Research said that owners of single hull tankers are rapidly approaching the 2010 phase out, as mandated under international law, but many of the ships will be under 20 years of age in 2010 and in other circumstances would not be close to the end of their useful lives,. Attracted by the lure of higher freight earnings in the dry bulk sector, some 25 VLCCs have been sent for conversion into ore carriers over the last nine months. A further seven have been converted to offshore, storage structures.

The move may create headaches for owners of dry bulk carriers as more capacity comes on stream, but could bring about relief to coal and iron ore charterers who have endured a relentless upward spiral in freight rates over the last 18 months.