The value of second-hand Very Large Crude Carriers (VLCCs) has significantly surpassed that of new-build ships. According to reports, the value of a five-year-old VLCC has now reached $218 million, which is 55% higher than new-build ships valued at $140.6 million. This gap is the largest recorded in history and clearly exceeds the previous record of 21% in December 2007.
Increase in the Value of Older Ships
While the value of new-build ships has only increased by 12.4% compared to last year, rising from $125.27 million to $140.8 million, the value of a 15-year-old VLCC has dramatically increased by 196.35%, rising from $55.07 million to $163.2 million. These changes clearly reflect the impact of revenues on the market.
Read more: Bilateral Electricity Contract; A Solution to Reduce Energy Costs in Industries
Market Drivers
The situation in the Strait of Hormuz has led to a significant increase in revenues on the route from the Middle East to China. One-year charter rates have reached their highest levels, increasing more than threefold year-on-year. Older ships allow owners to quickly capitalize on these revenues, and buyers are willing to pay more.
Sales of VLCCs in the 15 to 20-year age bracket have increased by 87.5% compared to last year, rising from 32 ships to 60 ships. One notable sale was the VLCC Eurospirit, with a capacity of 320,100 DWT and built in December 2011, which was sold to buyers in the Middle East for $153 million. The value of this ship was estimated by VesselsValue at $165.75 million. This ship was previously sold in 2020 for $46 million, thus the seller has faced a value increase of $107 million.
Buyers are primarily from South Korea, accounting for 67% of all sales this year, making them the largest buyers. The United Arab Emirates ranks second with 8%, and Greece follows with about 5%.
While 215 new VLCC orders have been registered this year, representing an 84% increase compared to last year, the delivery of these ships has been pushed into the 2030s. Therefore, anyone looking to trade in the current market must focus on purchasing existing ships.
Given the record revenues, the active buying and selling market, and the long wait for new ships, demand for older ships seems likely to continue. The key question is whether this increase in the value of 15-year-old ships compared to new-builds will be maintained if revenues from the situation in Hormuz decline.
Read more: Baltic Index Rises by 47 Points on Tuesday · Dry Cargo Freight Index Drops to Lowest Level in a Month
