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Old Habits Die Hard
After the disastrous accident in South Korea on the 7th of October 2007, where more than 66,000 barrels of crude oil was spilled into Korean waters, governments and oil companies in various countries cried out with promises to stop using single hull tankers. The picture of oil slick beaches, dying sea birds and several hundred thousands of volunteers’ working day and night to clean up the spill was broadcasted all around the world. With demonstrations by local fisherman who lost their livelihood and general public outrage, the South Korean government indicated that they would reduce the usage of single hull tonnage and ban single hull vessels from 2011, or 2015 with permission from flag and port states. South Korean GS Caltex and STX Energy followed up by banning single hull vessels from 2010 from their import program. Other Asian nations followed suit with the Philippines banning single hull vessels from April 2008. China and Japan also stated that they would reduce the usage of single hull vessels into their ports.
So, have these governments made good on their claims to change their ways? According to our tracking data, the Philippines have made tremendous strides in mandating and adhering to their ban of SH VLCC’s entering their harbors with no such vessels calling on their ports (so far) after the first quarter of 2008 - as promised. Japan is now down to only 8.5% imports on single hull VLCC’s, closely followed by China with 13.2%. India has also reduced their single hull VLCC usage down from 43.4% to 30% in the third quarter of 2008. As for South Korea, the country is down to 35.5% usage from 58.9% in fourth quarter of 2007 when Hebei Spirit accident occurred.
As for general usage of SH VLCC’s, Korea is still the leading destination with 27.5% market share during the third quarter of 2008. Behind Korea is India with 14.7%, China 12.7%, Taiwan 11.7%, USA 10.7% and Japan with 9.3%. Japan used to be one of the leading players in the single market but they have really worked with replacing single hull tonnage with more modern units.
Percentage share of import volumes in dwt for SH and DH vessels to the major SH VLCC destinations.
| Japan | China | India | Korea | ||||||
| DH | SH | DH | SH | DH | SH | DH | SH | ||
| 2006 | Qtr1 | 74.3 % | 25.7 % | 63.6 % | 36.4 % | 44.5 % | 55.5 % | 41.6 % | 58.4 % |
| Qtr2 | 75.0 % | 25.0 % | 77.8 % | 22.2 % | 34.2 % | 65.8 % | 38.9 % | 61.1 % | |
| Qtr3 | 73.5 % | 26.5 % | 75.0 % | 25.0 % | 32.2 % | 67.8 % | 43.4 % | 56.6 % | |
| Qtr4 | 78.2 % | 21.8 % | 75.3 % | 24.7 % | 31.2 % | 68.8 % | 48.3 % | 51.7 % | |
| 2007 | Qtr1 | 74.9 % | 25.1 % | 75.3 % | 24.7 % | 28.3 % | 71.7 % | 46.0 % | 54.0 % |
| Qtr2 | 84.6 % | 15.4 % | 78.4 % | 21.6 % | 32.1 % | 67.9 % | 31.8 % | 68.2 % | |
| Qtr3 | 85.8 % | 14.3 % | 80.2 % | 19.8 % | 43.4 % | 56.7 % | 24.5 % | 75.5 % | |
| Qtr4 | 88.7 % | 11.3 % | 86.0 % | 14.0 % | 43.1 % | 56.9 % | 41.1 % | 59.0 % | |
| 2008 | Qtr1 | 91.6 % | 8.4 % | 87.5 % | 12.5 % | 51.2 % | 48.8 % | 45.8 % | 54.2 % |
| Qtr2 | 90.6 % | 9.4 % | 86.6 % | 13.4 % | 56.6 % | 43.4 % | 55.8 % | 44.3 % | |
| Qtr3 | 91.5 % | 8.5 % | 86.8 % | 13.2 % | 70.2 % | 29.9 % | 64.5 % | 35.6 % | |
Already in the three first quarters of 2008 we are down by 30% of SH VLCC volumes compared to the same period in 2007 and the trend shows further decrease in volumes on SH’s. With this, we maintain our view that trading single hull vessels after 2010 will be very challenging and therefore the single hull fleet will be phase out according to Marpol Annex I phase-out scheme. Hence, there will be a good deal of scrapping activity of single hull vessels already this year as many of these SH ships are up for special survey or intermediate survey. We believe at least 21 single hull VLCC’s will hit the beaches this year and in 2010 we believe the remaining 86 vessels will follow.
Thus, the Hebei Spirit may not have turned out to be the catalyst for change as many had hoped for but it has certainly pushed lawmakers and governments in the right direction. And as they say, old habits die hard! (Exxon Valdez anyone?)
