Banks are backing out of the market to provide letters of credit (L/Cs) in deals in which ship owners sell older tankers to ship breakers according to a prominent shipbroker.

Clarkson Platou Hellas says that volatility in the market is behind the banks' actions as the supply of the tankers is substantially exceeding demand.

Volatile prices

More and more ship owners are electing to scrap their older tankers according to the shipbroker.

Owners are particularly keen to dispose of their vintage larger tanker units on the assumption that each week could see price levels drop because of the sheer volume of this type of vessel on the market according to Clarkson Platou Hellas.

The shipbroker reckons owners selling now may benefit from the speculative gamble by some buyers on the currently depressed market for vessels in Pakistan picking up.

Under pressure

But buyers will be under pressure if that market remains depressed and according to Clarkson Platou Hellas, it has been made aware that a number of banks handling the negotiation and discounting L/Cs have withdrawn from that market.

The banks take the view that the speculative buying of tankers on L/C terms is too risky.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.