Supertanker owners are slowing down their vessels in response to higher fuel costs and plunging rental rates, three shipbrokers said.
Benchmark hire rates for very large crude carriers, ships bigger than the Chrysler Building designed to ship 2 million barrels of crude, plunged 65 percent last week. Bunker, or fuel, costs have advanced 47 percent this year.
"Most owners say they have ordered the ships to slow down to economical speed," Halvor Ellefsen, a broker at SeaLeague AS in Oslo, said in an e-mail today.
The five-member Bloomberg Tanker Index has dropped 15 percent since the start of last month, on concern that lower rental rates and higher fuel costs will curb earnings for shipowners including Frontline Ltd. Slower sailing speeds reduce vessel availability and may bolster hire rates.
Hamilton, Bermuda-based Frontline and other owners cut their sailing speeds toward the end of last year as hire rates dropped. That was followed by the fastest gain in rates in November and December for at least 16 years.
The average VLCC is sailing at 9.87 knots, 7 percent slower than on July 12, according to ship-tracking data compiled by Bloomberg. The data include vessels at anchor.
Jens Martin Jensen, chief executive officer of Frontline's management unit in Oslo, said in a July 10 e-mail that shipowners would "soon" have to consider slowing vessels again.
Some VLCC engines can be damaged by sailing too slowly and so the option isn't available for all tankers.
Reports on owners ordering captains to slow down also came from Charlie Fowle, a director at London-based shipbroker Galbraith's Ltd., and Nikos Varvaropoulos, an official at Optima Shipbrokers in Athens.
Returns from shipping crude to Japan from Saudi Arabia, the benchmark voyage for the industry, fell another 18 percent yesterday to $48,538 a day, according to data from the London- based Baltic Exchange. Frontline, the largest owner of the vessels, needs more than $31,500 a day to make a profit on the carriers. For voyages to the U.S., daily income is $39,785, according to Baltic Exchange.