5th March 2010 - Playing The Long Game!

At the beginning of 2007 the Indian government announced that the remaining single hull Indian-flagged tankers could trade beyond 2010 but will still be subject to the 25 year age stipulation. At that particular time the Indian flagged fleet was predominantly single hull with the largest two owners, Shipping Corporation of India (SCI) and Great Eastern, owning 22 and 15 respectively, but with 16 newbuildings split equally between the two. In 2007 newbuilding and secondhand prices were moving up reflecting the strength of the tanker market at that time which may have put the brakes on any further Indian investment in tonnage.  It made perfect sense to continue with the single hulls. The waiver for Indian flagged tankers also showed a very welcomed ‘green light' to foreign flagged single hulls to continue to trade to India beyond end 2010.

Roll the clock forward 3 years and we can see that the picture in India has changed dramatically. There still remain 27 single-hulls and a healthy orderbook but, perhaps more significantly, the transformation to a modern double hull fleet is well underway. It is also worth noting that the average age of the remaining single hull tankers is 24 years (22 built in the 1980s & 5 built between 1990-94). Since May 2009, SCI have scrapped 1 MR and 6 Panamax tankers and announced their intention to sell more tonnage for demolition. SCI are also looking to take advantage of lower asset values by bringing forward plans to acquire secondhand and newbuilding resales. In January SCI purchased a 51,000 dwt MR resale (built 2010/Jan) for a reported US$32.5M, a vessel ordered at around US$48M in May 2007.

So where is all this leading? In all probability by the end of 2011, India may well have replaced its entire single hull domestic fleet. Earlier this year the Indian National Shipowners Association lobbied the Ministry of Shipping against allowing single hull tankers from coming to India. This in part may be to protect the cabotage trades, but also concerns about "making India a dumping ground for single hull tankers". The maritime regulator has already scrapped plans to allow foreign shipowners the right to register single hulls in India. Already we are seeing some of the major charterers moving towards a double hull policy. So don't assume that 2015 will be the cut-off date for the singles. Any further review of government policy could pull the curtain down sooner on one of the last refuges of the single hull tanker.