Low dry bulk freight rates to push up idle fleet – Lloyd’s List
April 5, 2011
by Colum Murphy
Singapore-based lay-up specialist expects two years of strong demand A DIFFICULT freight market in the global dry bulk sector during the next two years will see lay ups increase, including more lay-ups of newer tonnage, said managing director of Singapore-based International Shipcare.
The company was officially launched today following a management buyout of BP Shipcare by three former BP executives.
Mr Kramer said that recent earnings in some sectors of the shipping industry were lower than operating costs, prompting shipowners to give serious consideration to laying up vessels.
Citing recent industry analysis that showed that capesize vessels under construction accounting for more than 30% of global capsize fleet, Mr Kramer said the time was right for shipowners to include lay-up as an element of ship portfolio management.
The company has just under 20 ships laid up at its facility based in Labuan, Malaysia. The site had capacity for between 80 and 100 vessels.
Older vessels tended to be the ones selected for lay-up, Mr Kramer said. However, he had received “a couple of inquiries” from owners of newer tonnage that had been on time charter for a number of owners but had been re-delivered by the operators into a “very different maker”.
“In times of cyclical earnings, laying up an under-utilised vessel could be preferred to accepting a loss-making charter,” said Mr Kramer.
International Shipcare said there were “powerful economic reasons” for laying up ships in the current markets.
“Shipowners can expect to see considerable reduction in operational costs by as much as 90%. On average the fully built-up cost of lay-up is around $1,500 per day against current operational costs which can exceed $10,000 per day on some of the larger capital ships,” the company said in a statement.
Lay-up also involves certain one-off costs. For a typical very large crude carrier, there is fee of $10,000 for entering lay-up, while an additional $30,000 is charged for pre-lay-up preparatory work.
“There are also very significant savings in fuel costs as compared to leaving a vessel idle and reductions in insurance premiums by as much as 80% for instance on P&I cover,” International Shipcare added.
The acquisition from BP was led by Mr Kramer, former Asia Pacific regional director of BP Shipping, and two other former BP executives, Andrew Lockie and Noel Curran.
Under the terms of the acquisition, the entire shareholding of BP Shipcare was acquired by the former managers following BP’s decision to divest the non-core businesses in 2010.
Mr Kramer would not disclose the amount paid for the company in the MBO, but said his team offered a “competitive bid” that consisted of an up-front payment combined with a profit-sharing arrangement.
The company hoped to diversify from bulk carriers to include offshore vessels, Mr Kramer said. It also planned to reach out to smaller shipping companies, and was in the process of signing up agents in Greece, South Korea, Japan and possibly Germany, to expand its customer base.