61% of converted VLOCs are no longer operating: BIMCO

Since June 2017, 43% of the very large ore carrier (VLOC) fleet has been scrapped, according to data from shipowners association BIMCO. A further 18% of the fleet is idled or damaged, data from the world’s largest shipowner association (BIMCO) shows. Newer and more reliable ships are replacing them in the market.

BIMCO’s Chief Shipping Analyst, Peter Sand said that “the tragic Stellar Daisy accident brought the safety aspect of VLOCs into question”, adding that “going forward, the obsolete VLOCs will be phased out of the market and replaced with technolgically superior and more reliable ships”.

Leading Brazilian mining company Vale has said that that it will be phasing out from its operations 25 converted VLOCs. These had been converted from single-hull Very Large Crude Carriers (VLCC) towards the end of 2000. An IMO regulation had mandated that all single-hull tankers should be phased out by 2010. Investors paid to convert many VLCCs, for which demand at the time was low, into VLOCs. They then deployed them on long-term contracts of affreightment.

In June 2017 the VLOC fleet consisted of 51 ships with an average age of 23.8 years, not far from the average demolition age of 24.2 years, according to BIMCO data. The association argued at the time that the ships on long-term contracts still made solid economic sense, given a second-hand price equal to the scrap value, and stable ongoing earnings.

However, BIMCO noted that once the VLOCs no longer had to fulfil obligations under long-term contracts, the economic incentive to keep the ships afloat would cease.

Since June 2017, 22 ships have been scrapped while one is damaged and not in service. BIMCO believed that the investment strategy of converting cheap tanker tonnage to dry bulk carriers seemed unlikely to be repeated in the near term.

Sand said that “a shortage of tonnage will not arise because the converted VLOCs are now phased out. New and even larger ships have already been delivered to the dry bulk market, more than covering the transportation needs”.