VLCC rates breach $1m/day as Hormuz risk drives vintage tonnage above newbuild values

VLCC rates breach $1m/day benchmark as Hormuz transit risk inverts age premium#

The Baltic Exchange's TD3C benchmark for a VLCC carrying 270,000 tonnes of crude from the Middle East Gulf to China has exceeded $1m per day for the first time on record, according to Splash247. The rate is theoretical rather than transactional: the number of owners prepared to transit the Strait of Hormuz has dwindled and normal Gulf fixing patterns have broken down. Poten & Partners calculated VLCC earnings loading in the Gulf of Oman at around $450,000 per day, West Africa to Far East at $380,000 and US Gulf to Asia at $275,000. The previous VLCC earnings peaks were close to $200,000 per day in July 2008 and April 2020. Current Gulf numbers are approximately five times those levels.

Vintage tonnage trades at premium to newbuilds for first time#

A 10-year-old VLCC is now worth close to $150m compared with about $135m for a newbuilding, the first time 10-year-old values have exceeded newbuild prices, Braemar reported. Five-year-old South Korean-built VLCCs are assessed at around $170m. The premium increases with age: a 20-year-old VLCC is valued at $71.1m against $20.8m for scrap, a $50.3m spread and 3.4 times recycling value, according to Hellenic Shipping News. One year earlier the spread was near $18m. For Suezmaxes, the assessment is $52.1m against $11.9m scrap, a $40.2m spread and 4.4 times recycling value. The gap changes the disposal decision: special survey cost, sanctions status, insurance and vetting can still force individual removals, but on economics alone a commercially employable vintage ship is worth substantially more in continued trading than at the yard.

Suezmax and aframax earnings reach record territory#

Suezmax rates jumped from WS260 to around WS480 in one week for West Africa to East loadings, while cross-Mediterranean business reached WS600, BRS reported. Cross-Med suezmax earnings exceeded $435,000 per day. Aframax TD25 surged to around WS500, with some Mediterranean trades calculated at close to $187,000 per day. SSY described crude tanker earnings this month as at all-time highs, highlighting record Black Sea suezmax returns. The clean market is following: Middle East LR1 indications have reached WS800 and LR2s around WS750. Owners across multiple segments are increasingly reluctant to commit ships early as rates continue climbing.

National oil companies drive prompt tonnage scramble#

ADNOC has acquired six VLCCs since late July, Splash247 reported. Ships reportedly linked to Iraq have changed hands at exceptionally high prices. Braemar calculates NOC-owned VLCCs have carried around 24 percent of Middle East VLCC exports since the escalation began. BRS argued that risk appetite has increasingly trumped traditional fundamentals in recent months, with voyages loading inside the Gulf commanding an enormous premium over those starting outside Hormuz. UKMTO continues to classify the Strait of Hormuz at severe risk, with substantial risk across the Gulf of Oman. By 6 September, UKMTO had recorded 27 projectile-strike incidents around the Strait since 6 July, causing damage to commercial vessels.