APRIL 17, 2018 — Crowley Alaska Tankers, LLC, reported today that it has completed the acquisition of three tankers from ExxonMobil subsidiary SeaRiver Maritime Inc., and is now chartering them back to
JUNE 14, 2017 — Tesoro Maritime Corporation supertankers entering the Port of Long Beach will use ABB’s marine software to produce real-time data of the keel-to-seabed clearance, improving the safety and efficiency
MAY 10, 2017 — Overseas Shipholding Group, Inc. (NYSE:OSG), which these days describes itself as “a provider of energy transportation services for crude oil and petroleum products in the U.S. Flag markets,”
MAY 9, 2017 — Antwerp, Belgium, headquartered Euronav NV (NYSE: EURN & Euronext: EURN) has signed two seven-year time charter contracts with Valero Energy Inc. for Suezmax vessels with specialised Ice Class
APRIL 27, 2016 — John Fredriksen’s Frontline Ltd.(NYSE/OSE: FRO) is continuing its effort to acquire DHT Holdings, Inc. (NYSE: DHT). Should it succeed the resulting merged company would become the world’s second
As we pointed out in our Annual Yearbook & Maritime Review back in June, shipyards are struggling amid the downturn in the market, with newbuilding orders at their lowest levels since the 1980s. As further evidence, during the first half of 2016, orders for new ships worldwide dropped 65 percent as compared with the first half of last year, according to VesselsValue.
The leading ship valuation provider says that 689 newbuilds were ordered in the first half of 2015 as compared with a mere 239 this year.
As we mark the midway part of this year, VesselsValue also points out that $28.4 billion worth of vessels have been delivered this year, with another $43.8 billion worth still on the orderbooks and due for delivery in 2016. VesselsValue says that there a total of 2,518 vessels to be built in 2016, with 1,613 as yet undelivered by mid-year. Almost a third of the undelivered vessels are bulkers.
LPG tanker deliveries are on track for the year, with 50% of the 2016 orderbook having been delivered (worth $3.0 billion). However there is still 80% of the Offshore Support Vessel (OSV) orderbook still undelivered, valued at $5.5 billion. Overall, only 93 of the 500 OSVs on order were delivered to the fleet this year. VesselsValue Valuation Analysts say many of the undelivered vessels in underperforming markets are candidates for slippage: the vessel’s delivery date may be pushed back into the next few years.
The tanker outlook
Updating its Mid-Year Tanker Market Outlook, McQuilling Services says that 49 uncoated tankers were delivered at the end of July, representing “36% of our full-year expectations and supporting our original thoughts of a second half skew of tanker deliveries.” McQuilling Services sees the supply outlook over the next five years as a “tale of two halves.” It says the present year along with 2017 are projected to increase the DPP fleet as a whole by 3.6% and 5.7% on an average inventory basis. In total, we project 62 coated Aframaxes (LR2) and 46 coated Panamaxes (LR1) to join the fleet over 2016 and 2017, of which 27 have delivered as of August.
McQuilling Services says, “We anticipate that LR2 inventory will expand 10.7% and 9.9% in 2016 and 2017, respectively amid high deliveries and minimal deletions, while the MR product segment is to average only 1.0% growth through 2020. Overall, Clean Petroleum Products (CPP) growth will average 3.5% in 2016 before trending lower over the forecast period. The net fleet growth of the chemical fleet (IMO 2) is projected to expand by 13.5% in 2016, reducing to 3.4% in 2018 and below 2.0% in 2019 and 2020.
“We project spot rates for Dirty Petroleum Products (DPP) voyages to exhibit weakness in 2017 amid accelerating supply growth. TD3 freight rates will average WS 57 in 2017 before increasing to WS 71 by 2020. Floating storage economics may help stabilize the recent downturn in the market. Correspondingly, we anticipate VLCC TCE levels to average $33,800/day in 2017. Suezmax rates on TD20 are projected to average WS 66 in 2017, returning owners $15,300/day during the year. Aframax rates are likely to be elevated in the East with TD8 returning owners $19,600/day in 2017, following $22,300/day in 2016.”
According to McQuilling, CPP rates are likely to remain stable in 2017 due to increasing demand and decelerating supply. TC1 rates will average WS 108 in 2017, returning owners $19,200/day, while the LR1 trading the same voyage will generate earnings of $13,800/day. Gradually increasing freight rates through 2020 are projected. For MR owners, it is projected that vessels positioned in Asia will earn more than those in the West amid expanding refinery capacity in the East and slowing demand in the West. The TC2/TC14 triangulation will return owners $11,806/day in 2017.
Asset prices for secondhand DPP tankers will see losses continue into 2017 amid a weakening rate environment, while CPP values may see a slight uptick amid a more stable earnings outlook. Declining shipyard capacity and higher commodity prices may lead to a slight increase in newbuilding values next year.
Cruise market booming
The cruise ship market is booming, with orders for more than 60 cruise vessels valued at over $44 billion, including two 100-passenger coastal cruise ships being built at Nichols Brothers Boat Builders, Whidbey Island, WA, and two overnight cruise ships at Chesapeake Shipbuilding in Salisbury, MD. Chesapeake delivered the 185-passenger America to its sister company American Cruise Line in the first quarter of this year.
Matson orders two CONROs
In the U.S., orders for the first half of 2016 for new oceangoing ships for Jones Act trade have slowed, with shipyards working off their existing backlogs. The second half of the year started off with a bang as Matson Navigation awarded a $511 million contract to General Dynamics NASSCO, San Diego, CA, last month for two new LNG-Ready Container Roll-on/Roll-Off (CONRO) vessels that will have a capacity of 3,500 TEU. The two CONROs would be the 30th and 31st LNG-powered or LNG-Ready ships built, in operation, under construction or conversion for Jones Act service.
The birth of VesselsValue was driven by timing and need. In 2008, the crisis in the financial market extended into shipping. The dry bulk sector and the containership sector were hit the hardest, and while tankers remained relatively buoyant, banks needed to assess their capital commitments against the value of the assets being financed and being used as collateral. However, in the depth of the crisis (2010 / 2011), ship brokers were telling clients they could not value the ships as there had been no recent sale or “last done” in ship broker speak. Richard Rivlin, a sale and purchase broker with 30 years’ experience, had long felt that an automatic valuation system could be built, which would produce valuations in any market, at any time. Luckily, his brother is a Professor of Mathematics, and together they designed and built such a system. It quickly became apparent that the highly detailed multi-level regression model was far too complex for normal spreadsheets, and a specialist modelling company was employed to develop the model.
The model is fed by two databases. One contains the features and specification of the ships arranged in a unique structure that allows the computational model high speed access. This database is researched and compiled by VesselsValue own team of 30 researchers and analysts on the Isle of Wight in the UK. The second database consists of sale and purchase transactions and charters. Both feed the mathematic model which is operated by a team of quantitative analysts. The aim was to produce an instant, accurate and always available online ship valuations for the banks and finance houses, that form the main customers of VesselsValue.
Tankers Valuation
According to VesselsValue, five factors make up a valuation:
Each factor is broken down into further elements that are scored. As an asset, tankers are relatively straightforward, being highly commoditized, and standardized in terms of size ranges and specification. In part this is due to the international safety and pollution control legislation that has been forced on the tanker sector. This level of standardization makes VesselsValue task somewhat easier when it comes to scoring the factors, than offshore vessels, which have just been added to the system. In the case of tankers, there are around 140 scores. One of the most important scores is the shipyard. A vessel built in China is less desirable than one built in Japan. A well-published example is the one shown above. In November 2014, the New Century-built Supramax bulker ACS Diamond was sold for $10 million. The previous week, the slightly older Japanese-built pair of Supramaxes were sold for $15.5 million each. This was an implied discount of around 40% between Japan and China. However, the shipyard scoring goes into several levels of sophistication, including many ships the shipyard has built and when the last vessel was constructed.
This model is continually updated and recalibrated overnight to give the closest possible fit to the reported sales prices. It is the analysis of the sales that can produce the weightings required for different shipyards. These are applied to all shipyards, not just Chinese shipyards.
So far VesselsValue have performed over 1,000,000 valuations to date, about 400,000 a year and the number is increasing.
How Accurate is VesselsValue?
The split of VV customers are banks and finance houses, owners and other maritime industries such as lawyers, insurers and charterers – sophisticated market participants who insist on knowing the methodology behind our valuations. But ultimately they want to know how accurate are our valuations because this will affect their bottom line. Valuation accuracy is assessed as the difference between the price a vessel is sold at, and VV valuation on the day before the actual sales date. This is expressed as a % of valuations within a certain band of accuracy and shown in a chart form. The accuracy report is available on the website.
Tanker Valuations Development
According to the VesselsValue transactions database, between the start of 2012 and May 2016, a total value of $143 billion of tankers have been traded on the sale and purchase market. During that period the value of second-hand tankers has steadily increased, as can be seen from figure 1 (“VV Tanker Matrix”) below of the VV Tanker Matrix, expressed as USD / DWT.
During that period, the MR tanker has been the most frequently traded tanker type, both in terms of number of sales, and value (see figure 2 “Total Value by Type of Tankers Sold 2012 to Date”).
So far in 2016 (to 15 May 2016) 83 tankers with a total value of $1.4 billion, have been traded on the second-hand market, and again the MR tanker is the most popular (see figure 3 “Value of Tankers Sales Jan 2016 to YTD).
Interestingly, the average age of MR2 (Chemical / Product) tankers sold in the first five and half months of 2016 is only three years-old. Altogether 17 of these vessels were sold in this period, with eight tankers being sold by owners in the USA (these were not Jones Act vessels).
The majority of tankers and the largest value of tankers sold so far this year (2016) were constructed in South Korea, followed by Japan and China. As far as owners are concerned, the lead seller across all types of tankers was Chembulk Tankers, Scorpio Tankers and companies associated with the Navig8 group (see figure 4 “Top Ten Sellers of Tankers Ranked by Number of Vessels Sold”).
Recent Sales of Interest
The top three sellers have sold tankers for completely different reasons and strategy. In January 2016, Chembulk Tankers was sold by parent company Berlian Laju Tanker (BLT) to private equity investor Kohlberg Kravis Roberts (KKR). Chembulk Tankers is said to have a number of Contracts of Affreightments (CoAs) and the older tankers were surplus to requirement. This is part of the KKR growth strategy to rebuild the Chembulk Tankers fleet. KKR has also invested in a fund to invest in two Greek bank shipping portfolios.
The number two top seller, Scorpio Tankers, was a tactical, opportunistic sale. The purchaser, Bahri (formerly known as National Chemical Carriers of Saudi Arabia) is on something of a buying spree. Bahri has recently purchased two VLCCs from Tanker Investments in December 2015, for a reported $77.5 million. The five 2014-built MR2 tankers were sold en bloc for $167 million are trading in the UAE under Bahri CoAs.
The third most active seller, Navig8 Chemical Tankers, Inc., sold the four resales (the MR2 tankers are due for delivery in 2017) under a ten-year bareboat charter (with purchase option) for a reported $35 million each. This was an internal sale within the group, and part of a longer term strategy.
MARCH 24, 2016 — Athens headquartered TMS Tankers Ltd, part of George Economou’s Cardiff Marine Group, has selected Wärtsilä fixed pitch propellers (FPPs) for its new vessels under construction in China. The
“Tank cleaning is where companies try to establish a competitive edge,” says Ajay Gour, INTERTANKO’s chemicals and vetting expert and Regional Manager for the Indian Sub-Continent, Middle East and Africa. “This is where they can claim to be better than the competition. But the majority of ship operators are all experienced, and the technology and methodology are pretty much the same across the board. Cleaning chemicals have seen some significant advances, but where we found the biggest change was not in cleaning, but in tank testing.”
Testing technology has improved immensely, Gour relates, but operators have not necessarily been the drivers behind improvements. “There are many different external influences, including scientific community, and testing today can measure levels of cleanliness far beyond the original requirements for the same cargoes.”
Ever more sensitive testing methods beg the question: Should tanks be as clean as possible? Or just sufficiently clean?
Lacking a working standard
INTERTANKO studied cases emanating from Houston, a major chemical tanker hub.
“We looked at over 250 different listings,” Ajay Gour recalls. “We found that there were various cleaning standards and varying results for the same cargo with the same end-use. There was evidence that resources were being wasted in over-cleaning, including manpower, energy, time, chemicals, and the resulting emissions were excessive.”
In response, INTERTANKO has proposed a simplified set of standards in order to bring the high-flying cleanliness requirements back down to sea level. “Product manufacturers realize that they have been pushing unduly stringent standards, and they understand that this is a cost driver. In a number of cases, small deviations will not push the cargo off-spec,” Gour maintains.
A working group of chemical tanker operators, owners, charterers, and manufacturers is in the early stages of reviewing existing standards, not for tank cleaning, but for tank cleanliness. “We are not telling anybody how to clean in order to achieve a certain standard,” Gour clarifies, “just advising on what standard they need to clean to.”
Nor do the proposed standards advise on how to test. “For example wall washing,” Gour relates. “It’s been around for a long time, but it has its weaknesses. It gives only a snapshot, not the status of the entire tank.” All the same, INTERTANKO is not singling out wall wash tests, or any other particular method.
“We are simply trying to refine cleanliness standards,” he says, “to make sure they are appropriate for today’s needs. High sensitivity testing is feeding anxiety in cargo owners and charterers, and our intention is to ensure quality while improving efficiency in the use of resources.”
Regarding the timeline for change, Ajay Gour’s advice to owners and operators: Watch this space. “The process is set in motion, and the first draft of new guidelines should be presented by the end of 2016,” he reports. “For this to happen, though, operators, shippers, and cargo buyers must all be on board. The drafting process will be used to quantify the overall benefits, but the end result should be that the goalposts are fixed for everybody.”
Taking the confusion out of tank cleaning
Understanding the required cleanliness standard for your vessels’ next cargo is one thing, but consistently achieving it can be a challenge. With decades of experience in the field, here are some words of wisdom from service leader Wilhelmsen Ships Service (WSS) on how not to go astray in the critical business of keeping tanks and cargoes up to spec.
Regardless of whether it is the result of poor preparation, lack of knowledge, time constraints or inadequate equipment, an unsatisfactory tank cleaning can become very costly, very quickly. Extra time in port, additional labour and chemicals, added surveyor charges, and in the worst cases demurrage claims, can turn what should be a routine exercise into a laborious and dreaded task.
To make matters worse for owners and operators, the issues affecting the tank cleaning process are amplified by the increasingly vigorous ad-hoc cleanliness standards currently being demanded by charterers and cargo owners. Often over-zealous and in many cases totally unnecessary, when it comes to the actual chemistry of contamination, there is unfortunately no officially-defined, universal set of cleanliness standards at present.
Instead, there are just two, very broad and de-facto criteria covering the various tank cleaning requirements currently demanded by charterers.
An inadequate pair
The first is the Water White Standard, which means the tank is visually clean, dry and odour-free. A suitable standard for CPP/vegetable oils, this standard does not involve a wall wash test.
The second, the High Purity Standard (HPE), is required for sensitive cargoes to be loaded such as products applied in food processing (Food Grade) or in pharmaceutical production (USP), where any contamination is unacceptable. All active solvents, such as chlorinated hydrocarbons, glycol ethers, light alcohols, for example, methanol, ketones such as acetone and many hydrocarbons like hexane also require the HPE.
In addition, many chemical companies require the HPE because the application of the product during processing is very sensitive to contamination.
Though there are guidelines on the procedures and typical level of cleanliness required by the High Purity Standard for each and every product available, many companies have additional, off-spec requirements. Creating unwanted confusion for cleaning crews and posing considerable problems when it comes to demurrage claims, these ad-hoc requirements are why bodies such as Intertanko are eager to establish a new, detailed set of cleaning standards. An ongoing initiative aimed at creating an industry wide set of rules, its acceptance is by no means guaranteed. So, for now we’re stuck with the existing pair of standards and the numerous company-by-company and cargo-by-cargo variations demanded by charterers.
In spite of this, with detailed planning, preparation and access to some basic information on the cargo’s properties and the conditions inside and outside the tanks, tank cleaning should actually become a matter of routine. Systematic, efficient and completed quickly to the required standard, whatever that may be. No rejections, hold-ups, incidents or accidents.
Chemistry 101
Knowing the properties of the products you’re discharging and loading, along with understanding how they interact with each other and with the surface of your tanks is obviously key. However, learning this from scratch can seem a daunting prospect, hence the ongoing success of Supercargo specialists. But in practice, the vast majority of commercially traded cargoes and their associated tank cleaning processes can comfortably be managed in-house with access to a specific cargo-handling database, such as Miracle or Milbros, and just a little basic knowledge on the major product groups, as outlined below.
Water-soluble or water-miscible
Water-Soluble substances and water-miscible substances are easy to clean with water. In addition, the solubility of such substances might increase at higher temperatures. While the use of a cleaning agent is not required, it can help reduce cleaning times.
High melting point
Such products should be washed at a temperature of 15-20C above melting point. During washing there should be no ballast water or cold cargoes adjacent to the tank to be cleaned. Special attention must also be given to liquid and vapor line systems to avoid freezing/solidification at cold line segments. Beginning the tank cleaning process as soon as possible after discharge is strongly recommended.
High viscosity
These products should be washed at higher temperatures. In general the viscosity is closely related to the temperature and will decrease at higher temperatures. During washing there should be no ballast water or cold cargoes adjacent to the tank to be cleaned. As with products with a high melting point, washing should begin as soon as possible after discharge.
High vapor pressure/boiling point
Products with a high vapor pressure (higher than some 50 mbar at 20 C) can actually be removed from the tank by evaporation. As always, during ventilation, special care must be taken to prevent the risk of explosion (flammable products) and emissions (toxic vapors).
Polymerization
The initial wash of products that tend to polymerize should be carried out with cold (ambient) water. Washing with hot water results in polimeric residues being left in tanks and lines, meaning an incredibly difficult clean-up job.
Evaporation of volatile substances
Cargoes consisting of mixtures with different vapor pressures should neither be cleaned by evaporation, nor prewashed hot. The evaporation of the light substances from a mixture could result in non-volatile residues, which are very difficult to remove.
Isocynates
Must never come into contact with water, not even the residues, because the reaction product and insoluble urethane (plus CO2) are very difficult to remove. Such products must be washed with a suitable solvent that does not contain any water.
Reaction with oxygen
Drying and semi-drying vegetable and animal oils react with oxygen to form a varnish-like polymeric film. This is very difficult to remove from bulkheads. Since heat increases the speed of the reaction the initial washing of these products must be done with water at ambient temperature, and as quickly as possible.
Reaction with hard water
Formed by the calcium and magnesium present, seawater, for example, has a very high water hardness. This poses no problem for most products, but fatty acids and vegetable oils with a high free fatty acid content will form white sticky residues if they are cleaned with a water of a high water hardness.
Smell
Minor residues of a smell-producing cargo left in lines, valves and pumps (including pump cofferdams) can contaminate a sensitive cargo. To neutralise the smell of some chemicals (e.g. Acrylate, Nitrobenzene or Pygas) the use of a smell killer may be recommended.
Understanding the conditions. Inside and out
Along with product knowledge, an understanding of just how the conditions in and outside tanks can affect a cleaning job is vital for consistently successful cleaning:
The neighboring areas
Temperature is one of the major parameters in any tank cleaning procedure and it must be monitored and managed carefully. The temperature in the cargo tank can be significantly influenced by the surrounding conditions, including outside temperature, seawater temperature, ballast conditions, and the temperature of adjacent cargoes.
Deviations from the desired operating temperature can affect the entire tank or just parts of the tank, typically around bulkheads, tank bottoms or tank walls. Two common results are freezing due to lower than allowed temperature, and polymerization/drying due to higher than allowed temperature.
The Tank Surface
Having managed the surrounding conditions, focus should turn to the surface of the tanks. Their composition and condition can have significant implications for the cleaning process.
Stainless steel
Corrosion can occur if there is surface contamination. Both pickling and passivation are chemical treatments applied to the surface of stainless steel to remove contaminants and assist the formation of a continuous, passive chromium oxide film. Pickling and passivation are both acid treatments and neither will remove grease or oil. If the steel is dirty, it may be necessary to use a detergent or alkaline cleaning before pickling or passivation.
Zinc silicate coating
An anti-corrosive paint system made from zinc dust, with certain additives and a binder. The high levels of zinc dust produce a zinc-zinc metal contact resulting in cathodic protection, similar to that obtained from galvanizing. However, zinc coatings are inherently porous, presenting a variety of cleaning problems. It is believed that the cargo migrates into the pores and capillaries, similar to fluid adsorption processes. Zinc coatings have a good resistance against solvents, but are not resistant to strong acids and bases.
Epoxy coatings
Pure epoxy, phenolic epoxy and isocyanate epoxy form cross linkages resulting in relatively good resistance to a greater range of cargoes. Epoxy systems are usually resistant to some weak acids and strong alkalis and do not absorb oil-like substances. Epoxy coatings are, however, prone to absorbing some solvent-like cargoes. This absorption is caused by swelling and subsequent softening of the coating. After transporting aggressive cargoes, the coated tank has to be ventilated until the cargo has been desorbed (released) from the coating film, which results in hardening and decreased swelling. This can take up to several days, depending on the type of cargo, type of coating and film thickness. Water may not be used for cleaning until this ventilation process is finalized. Otherwise the water can lead to blistering and subsequent serious damage of the coating. The more solvency power a cargo has, the more cargo residues could still be present in the coating. This could lead to either contamination of the next or subsequent cargoes, or breakdown of the coating film.
The total value of the order is $200 million. The first delivery is planned for the end of 2017 after which the vessels will be delivered at three month intervals.
The vessels are of the same type as ten chemical and product tankers ordered by Stena Bulk in 2012 from the same shipyard, the first four of which were delivered earlier this year.
All the IMOIIMAX tankers will be deployed in Stena Weco’s global logistic system, which currently employs more than 60 vessels.
“We are very satisfied with the performance of the IMOIIMAX tankers and are thus adding to this part of our fleet still further,” says Erik Hånell, CEO of Stena Bulk. “With their greater efficiency as regards fuel consumption and cargo, these vessels are also environmentally superior compared to many other vessels in their class, which, of course, is a major advantage. Commercially, they are a good complement to our fleet.
Four of the ten vessels ordered earlier – the Stena Impression, Stena Image, Stena Imperial and Stena Important – were delivered this year and the remaining six vessels will be delivered by 2017. One is wholly owned by Stena Bulk, six are owned together with GAR (Golden Agri Resources), two are owned by the sister company Concordia Maritime and one is wholly owned by Stena Weco.
The IMOIIMAX concept is a further development of a well-established and successful concept offering extra high cargo flexibility and even lower fuel consumption. Stena Teknik, together with the shipyard, which was formerly GSI (Guangzhou Shipyard International), was responsible for the technical development of the ships. The IMOIIMAX tankers have 18 tanks enabling them to transport both vegetable oils and chemicals such as petroleum products.
