The Difference $5,000 A Day Makes

In the last issue, Marine Money compared the costs of running a new vlcc versus running an old one, and explored many of the variables which factor into the shipowner’s decision regarding investment in newbuildings (see “To Build or Not To Build,” February 1-15, 1995). We discovered neither venture is a money maker in the present market. On one hand, you have a new vessel with high capital cost but lower maintenance; on the other hand, you have low capital cost but high operating costs because of increased maintenance and repair. But freight rates are not strong enough to support either profitably, even given premium for newer vessels.

The only solution is scrapping older vessels. Oversupply must be corrected before shipowners can make money transporting crude oil. Speculation abounds as to when all this extra tonnage will actually drop off the market, so Marine Money decided to focus instead on what it would take vis-a-vis rates and leverage to make money running either a new vlcc or an old one with different gearing levels.

This is only an excerpt of The Difference $5,000 A Day Makes

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