A United Nations ban on oil tankers that use a single layer of steel to separate their cargo from the sea may leave the industry short of tankers, London-based shipbroker E.A. Gibson Ltd said.

According to a UN ruling that came into force on Monday, all single-hulled ships will have to stop sailing by 2010. Shipowners must scrap 169 tankers with a combined capacity of about 6.9 million tons this year, or 2.1 per cent of this year's global capacity. By 2010, as many as 1,402 ships carrying 104.6 million tons, or a quarter of global tanker capacity, would have to be scrapped, Gibson said.

Ulsan, South Korea-based Hyundai Heavy Industries Co, the world's biggest shipyard, and other shipbuilders have limited capacity to build new tankers as they struggle to meet demand for more profitable container ships and liquefied natural gas carriers. "The problem now is that shipowners will have to wait until 2008 to get any delivered with the South Korean shipyards already full with orders, said Kang Sang Min, a shipbuilding analyst at Tong Yang Investment Bank in Seoul. "Shipowners have already put in orders for most of the tankers they would need with the new regulation."

The UN's International Convention for the Prevention of Pollution from Ships was amended to speed up the phase out after the Prestige sank off the coast of Spain in November 2002 while carrying 77,000 tons of fuel oil. Double-hulls, mandatory in all tankers built since the mid-1990s, reduce the risk of pollution if a ship is damaged in an accident.

The phase out is staggered by age. Tankers built before 1997 and those with certain kinds of cargo tank structures were required to have stopped going to sea on Monday. As tankers reach the 26-year-old mark over the next five years they have to be phased out. All remaining single-hulled tankers are set to be abolished in 2010.

Rate impact

The UN's move "will have some impact on the oil tanker rates because this ruling will affect the supply and demand of these vessels, Kang said.

Oil tanker rates, which usually fall in the second quarter, may climb in the next three months as OPEC boosts production to meet demand from the United States and China.

With demand for ships exceeding yard capacity and rising steel costs, the price of building a 2-million-barrel oil tanker, or very large crude carrier, has more than doubled since September 2002. If the schedule turns out to be too drastic, the industry may have a get-out clause. Under the convention, individual flag states may authorize single-tankers younger than 25 to carry on trading until 2015.

The rules also ban single-hull tankers from carrying fuel oil, one of the dirtiest products of oil used in power generation, and heavy grades of fuel oil.

Singapore has required single-hulled oil tankers to announce their arrival 24 hours in advance since Monday.

The city state's Maritime and Port Authority said in a statement on April 1 that single-hulled tankers of more than 5,000 tons must inform authorities of their cargo 24 hours before they arrive in Singapore. Ships that do not comply may be denied entry to the port or detained. About a 10th of the 133,185 vessels that arrived in Singapore last year were oil tankers.

In 2004, 12,930 oil tankers with total capacity of 286.54 million gross tons, arrived at the island nation, 6.6 per cent more than the previous year in gross tonnage terms.

Singapore will also waive port dues to help cut costs for double-hulled oil tankers, Lim Hwee Hua, minister of state for finance and transport, said last month.

South Korea will deny entry into its ports to single-hulled tankers. Starting yesterday, South Korea's companies will be banned from operating single-hulled oil tankers that have a capacity of more than 5,000 tons.

(China Daily 04/06/2005 page12)