Time to think about converting?
Shipping was once fertile ground for entrepreneurs and opportunities were eagerly seized but some of that spirit seems to have gone missing in recent years. Throughout the last fifty years or so converting unwanted vessels into something else to give them an extended lifespan has been a profitable strategy. Stretching and widening ships has been a quick way of expanding capacity, existing general cargo ships have been fitted for containers, ro-ros have been turned into cable layers, and when single hull tankers were being phased out prior to the crash of 2008 a number found themselves turned into bulkers and some were even converted to semi-submersible ships. In the offshore sector turning old tankers or LNG carriers into FPSO and FSRUs has been a way to provide capacity quickly while new units were under construction. Currently some operators are attempting to turn orders for new bulkers into orders for tankers since the dry sector prospects have fallen off a cliff and tankers appear to be the only vessels in demand. The over tonnaging of the bulk sector could be remedied by a sustained period of scrapping but scrap prices have plummeted and demand for scrap steel is also well down so shipbreakers are finding it harder to dispose of the raw material. In the shipbuilding sector, yards everywhere are facing bankruptcy as orders drop and prices also fall. On Wednesday crude oil prices ended the day almost 6% down with the $35 per barrel level well and truly breached and looking to head lower. Some analysts believe the continuing fall is due both to lack of storage space and lack of demand. Perhaps there is solution to some or all of the problems that is just waiting to be put into action. A little thinking out of the box could see idle yards could be put to converting excess bulk carriers to storage units for some of the excess oil. It would allow traders or even national governments to buy up cheap oil and stockpile it for when prices inevitably rise. For traders it would mean profits and for governments a buffer stock to absorb and manage rapid changes in oil prices. For shipowners the over tonnaging would be reduced leading to higher freight rates. Oil could even be stored in tank containers on idled box ships again raising rates to realistic levels. Image Courtesy Celiktrans Shipyard