The global recession has driven down ship prices, with the price of used VLCC (very large crude carriers) plunging by 50%. In addition the delivery time for such used ships is only two-to-three months, as against two years for new orders. "We are especially scouting for oil tankers and offshore vessels that are up to five years old," says K.S. Nair, director (bulk carriers and tankers) at the Shipping Corporation of India (SCI).
Businessworld
While the price of a five-year-old VLCC has corrected from $160 million to $77.5 million, that of a five-year-old Suezmax has gone down from $105 million to $50 million. During the same period, the price of a five-year-old Aframax plunged from its peak of $80 million to $37.7 million. Recently, SCI invited bids for two medium-sized bulk carriers, two oil tankers and two offshore support vessels.
To some extent, those orders are for replacement to comply with new maritime rules that will bar single-hull tankers and dry bulk ships that are more than 25 years old from early 2010. "Freight rates follow the trends seen in the world economy," says V. Ashok, director and CFO of Essar Shipping and Logistics. He adds that with demand for oil falling in 2008 and strategic oil inventories in the US, which is the largest oil importer, remaining at all-time highs, freight rates would remain subdued over the medium term. This is likely to keep a check on ship prices.
