Greeks say ban on single hulls will hurt oil market

  • 2003-06-21
  • Harry Papachristou

The Greek shipping community, the industry's biggest player worldwide, has strongly opposed a European Union decision to send single-hull oil tankers to the scrapyards by 2010 and warned the move will disrupt international petroleum flows around the turn of the decade.
"It's going to be complete chaos in 2009," a ship owner told journalists on condition of anonymity.
Greek shipping circles maintain that Asian shipyards will not be able to churn out enough replacements for the old vessels by the 2010 deadline.
Capacity will dry out and freight rates will go through the roof, they added.
Practically putting an end to the maritime security debate that erupted last November after the sinking of the Prestige, a single-hull tanker that went down off the coast of Spain spilling 40,000 tons of fuel oil into the Atlantic, the European Parliament last week approved a plan to bring forward the ban on single-hull oil tankers in EU waters to 2010.
According to data compiled by Newsfront, a Greek shipping review, 19 single-hull, Greek-flag oil tankers will have to be withdrawn immediately after the new rules are enforced, probably by the end of the year.
Another 64 are to follow by 2010. A large number of Greek-owned ships registered under different flags will also be affected.
Trading tonnage in the EU area will be greatly reduced as the phaseout takes effect, Jarle Hammer, chief economist at Fearnresearch, warned at a recent shipping conference here.
He predicted that there would be a "dumping of disqualified tonnage to other areas," with ships as young as eight years old being phased out.
The speedier phaseout will be a boon to shipbrokers as well as South Korean and Japanese shipyards instead, ship owners said. Enjoying an influx in orders, South Korean shipbuilders have already said they aim to control 40 percent of the world market for new ship construction by 2012, up from their present 33 percent share.
"EU politicians are naive if they believe we will turn to European yards," the shipowner said.
Europe's fledgling shipyards find it hard to compete with their more efficient Asian rivals and turn to directly awarded state-financed navy contracts to stay in business.
Hellenic Shipyards, Greece's top builder, obtained warship contracts worth 3.2 billion euros that are to provide work for the yard until 2010.
Greek ship owners are particularly embittered as they had already embarked on a vast building program following an earlier deal to phase out single-hull tankers by 2015.
"Greek ship owners had realized themselves that double hulls are safer and invested in them," shipping analyst David Glass said.
The EU's "politically motivated decision to accelerate the ban disrupts our planning," the shipowner said.
According to the Greek Shipping Co-operation Committee, 203 Greek-owned ships were on order in June, including some 60 tankers. The Greek-owned fleet's average age has already fallen from more than 20 years at the end of 2000 to 17.4 years.
But the move into double hulls reflects a combination of political pressure and lower shipbuilding costs resulting from higher competition in Asian yards and lower interest rates worldwide.
A change in the Greek ship owners' business strategy also seems to be under way.
Traditionally, Greek ship owners "preferred high-leveraged inexpensive old ships that could be operated at low cost and sold in market pickups for considerable profit," said the National Bank of Greece in a recent report.
"The earlier Greek shipowner generation had more seagoing experience and a more hands-on approach," Glass said.
The new generation of ship owners deal more with their bankers than with their engineers, he added.
According to the latest GSCC data for May, Greeks control 9.3 percent of the world's ships in service and on order.