CHINA TAKES LEAD IN TANKER VLCC MARKET

Published Mar 9, 2005 12:01 AM by The Maritime Executive

China is scouring the world looking for more oil, as its domestic output lags behind demand. The International Energy Agency predicts global oil demand will increase by 1.8% this year, with China's demand increasing by 6.3%.

In 2001, China had no oil tankers, but the four carriers plan to create a fleet of 18 very large crude carriers (VLCC) by 2008. China consumed one in every 12 barrels of crude oil in the world last year, and is expected to increase imports by 34% to more than 2.5 million barrels per day.

China Ocean, China Shipping Group, Sinotrans, and Hebei Ocean have ordered enough tanker tonnage to transport 38.8 million barrels of crude oil, or 15 days worth of Chinese imports. The expansion of the Chinese fleet has helped increase the cost of a VLCC by 56% from 2003 to $120 million per unit. In November, 2003, VLCCs were being chartered for $100K per day. Today, VLCCs are being chartered for about $250K per day.

The demand for new tankers, container ships, and LNG carriers has created huge backlogs at shipyard in South Korea, China, and Japan. A VLCC ordered today will not be delivered until 2008.

The current situation has created a huge demand for older double-hull VLCCs. The price for a 10-year old VLCC has risen 53% to $86 million. The worldwide demand for oil this year is expected to rise to 1.52 million barrels per day.