The Lure Of Massive Profits Attracts Veteran Vessels To Russia’s Oil Trade

The fallout resulting from Russia’s invasion of Ukraine in February 2022 is continuing to make waves in the world of shipping, with comparatively older tankers being used on the route hauling the country’s oil to India and China from the Far East.

At least four tankers that are about 15 years in age or older have joined the vessels aimed at delivering Russia’s oil from Kozmino from May 2022, per shipbrokers. The port typically handles almost 30 cargoes comprising ESPO crude in a month with Aframax vessels that can be loaded with approximately 700,000 barrels.

While Western sanctions against Moscow after the invasion put some of the shipowners off from handling the OPEC+ producer’s cargoes, the resulting upheaval has reportedly inflated the earnings for those still in the trade and lifted vessel valuations, as well.

Profits for shippers on the Kozmino-to-China route are about triple the level seen before the outbreak of war, although they have slightly eased.

Although vessels aged 15 years remain sea-worthy, typically, they tend to be slightly less efficient than the new builds and may also need to go through more maintenance work. Yet, the short, five-day voyage to China from Kozmino, coupled with high profit from plying the route, has worked to attract old vessels.

To draw more business, the arrivals have been offering relatively lower prices, bringing down the rates on the route, the shipbrokers said. The apparent massive cost for the delivery into China from Kozmino is now approximately $1.5 million, below the peak, capped at $1.7 million observed in June and July 2022, they mentioned.

Aframax Values

The opportunities have stoked interest in used vessels. So far this year, the value of older Aframax vessels has increased by nearly 60%, with a 15-year-old tanker now worth approximately $29 million, per VesselsValue’s data.

Despite the recent drop in the freight rates, prices continue to be “inflated” when compared to the historic averages, mentioned Olivia Watkins, the head valuations analyst of VesselsValue. That has resulted in owners wanting to take advantage, she added.

So far, in 2022, 58 Aframaxes have changed hands, 50% above the number observed in the same period of 2021, per VesselsValue. Some of the new ships to the route were reportedly bought by shipowners registered in Hong Kong and Vietnam, per data tracked by shipbrokers and Bloomberg.

References: Gulf Today, Khaleej Times