Market outlook of VLCCs in the next 5 years

• Main Author: Cheah, Peifang.
• Other Authors: School of Civil and Environmental Engineering
• Format: Final Year Project
• Language: English
• Published: 2011
• Subjects: DRNTU::Engineering::Maritime studies::Maritime management and business
• Online Access: http://hdl.handle.net/10356/45183
• Institution: Nanyang Technological University

This paper aims to analyze the Very Large Crude Carrier (VLCC) market and make recommendations as to whether potential investors should invest in the market over the next 5 years. The report shall focus on analyzing the demand and supply factors and subsequently draw a conclusion based on their effect on the freight rates. This can be achieved by segmenting the market into 5 bands based on historical Time Charter Equivalent (TCE) namely very weak, weak, steady, strong and very strong condition and a forecast of the strength of the freight market will be derived (ie the band the market will fall in). Discounted cashflow analysis would be applied to derive the Net Present Value (NPV) and the Internal Rate of Return (IRR) of investing in newbuild, 5 year old, 10 year old and 15 year old VLCC based on the forecasted freight rates under the various scenarios (varying WACC from 0 to 20%). The IRR would then be compared against the aggregated Return on Equity (ROE) of 10 companies listed in the New York Stock Exchange (NYSE) in order to provide recommendation to the potential investor (invest if IRR>aggregated ROE).