Investing in the VLCC sector: stay or go?


The short-term indications are positive for the VLCC sector. Is now the time to invest?

In my opinion there is an air of cautious optimism in the latest batch of broker reports concerning the state of the VLCC sector. Shipping Intelligence Weekly (SIW reports a dramatic increase in VLCC earnings, although in some ways the bounce is back to the level of earnings required to operate the vessels.

Even so, on one route, Middle East Gulf-US Gulf, the leap in average earnings produced a percentage change so large and long that it would not fit in the space provided (I know, I use to edit SIW).

The upward climb in average VLCC earnings comes with a caveat from Clarksons that the conditions are driven by a lack of open tonnage, which might be short-lived.

At the same time, Fearnleys report that demand for VLCCs has picked up in line with the start of the northern hemisphere VLCC winter market.

These short-term indicators are encouraging but Maritime Strategies Internationals (MSI) new managing director (Mike Payne having taken a well-deserved early retirement) Dr Adam Kent has gone further.

Speaking at the Maritime CEO Forum last week, he said “We (MSI) think that in the VLCC sector this year we are effectively seeing negative fleet growth, which is the first time since 2002.”

In my opinion, this statement should not be interpreted as “Now is the time to order VLCCs.”

Indeed, the release today of the IPCC report on global warming – or should that be global warning – puts a question mark over long-term investments in shipping. This topic I will explore in my Marine Propulsion comment.

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