Tanker Rates Could Get Further Boost from Ballast Water Rules

CR Weaver says new BWTS rules will increase occurrence tanker dry docking, benefiting tanker rates.

Shipbroker, Charles R. Weber Company, Inc. (CR Weaver) says that already buoyant tanker rates could get a further boost as tonnage is taken out of service for special surveys or dry docking ahead of the implementation of the 2004 Ballast Water Management Convention, Hellenic Shipping News reports.

The new rules will make it mandatory for vessels to install ballast water treatment systems (BWTS) as per a predefined schedule.

"For VLCCs (Very Large Crude Carriers), which fall firmly within the highest ballast water capacity range, the schedule calls for units built prior to 2011 to install BWTS by the first renewal survey after the anniversary date of delivery in 2016 while units built after 2011 must install BWTS by first renewal survey after the convention enters into force on 1 January, irrespective of their construction anniversary date," explained CR Weaver.

Most market participants are said to be expecting the convention, currently backed by 34 percent of the world’s gross registered tonnage (GRT) with 35 percent required for ratification, to be implemented by the end of the year.

"This has prompted a surge in the number of units undertaking special surveys or dry docking in order to delay their installation date," said CR Weaver, a situation expected to remain for the rest of the year.

The matter is said to be particularly pressing for older tonnage, where the estimated $1‐3 million BWTS installation cost may make little sense based on the vessel's remaining useful life.

Demand for tankers has rocketed on the back of crashing oil prices, and earlier this month Ship & Bunker reported that very large crude carrier (VLCC) rates on voyages between the Persian Gulf and East Asia reached a five-year high at $100,000 per day.

With vessels potentially being taken out of service for around 20 days for dry docking, the balance of supply and demand could be pushed even further in favour of the shipowner. 

Last month Ship & Bunker reports that despite rising charter rates, VLCCs were once again becoming attractive for use as floating storage.