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http://www.businessweek.com/printer/magazine/depressed-tanker-rates-are-crippling-fro...
11/25/2011
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mega-tankers, which haul about 20 percent of the worlds oil, were $28,829 a day in midNovember, according to Clarkson. Thats a shadow of the $229,000-a-day rate peak in 2007. Frontlines largest tankers need to bring in $30,200 a day to break even but made only $17,000 in the third quarter. Frontline says it has orders for seven new oil tankers, including five very large crude carriers and two smaller ships that haul 1 million-barrel cargoes. Five of those vessels are not yet financed. The ship owner reported a third-quarter loss of $166.6 million, compared with net income of $12.72 million a year earlier, and it says it will pay no third-quarter dividend. Frontline said in early November that it would sell three vessels. That may not be easy. The global tanker fleet has expanded 11 percent to 555 vessels since the end of 2008, and shipyard orders still equal almost 15 percent of existing capacity, IHS Fairplay says. The main problem right now is there are too many ships, which means we need to increase the demand, says Jens Martin Jensen, chief executive officer of Frontlines management unit. The alternative isnt pretty for Frontline. If the market doesnt improve, Troim says, we may have a breach in the covenants package, and we may run out of cash in the first half of 2012. The bottom line: Supertanker operator Frontline, whose shares have plunged 88 percent this year, could run out of cash in 2012. Nightingale is a reporter for Bloomberg News. Bhatia is a reporter for Bloomberg News.
http://www.businessweek.com/printer/magazine/depressed-tanker-rates-are-crippling-fro...
11/25/2011