Frontline cancels six tankers

John Fredriksen’s Frontline has cancelled orders for six newbuilding very large crude carriers and Suezmaxes at Chinese shipyards worth more than $550m and representing 33% of its order-book. However, Jens Martin Jensen, now Frontline Management’s permanent chief executive, said Frontline did not expect to cancel further newbuilding contracts. After the company’s first quarter results were issued, Jensen predicted that a third of all tanker orders could be delayed or cancelled.

He told a conference call that some vessels due for delivery in the fourth quarter of this year could be pushed back into 2010. However, he said it would be from the middle of next year and into 2011 and 2012 were the market would “see the big change in the orderbook.”

Frontline said it had agreed with Jiangsu Rongsheng Heavy Industries and Zoushan Jinhaiwan on the cancellation of four Suezmaxes and a pair of VLCCs representing a contractual cost of $556m. The company had a total of 18 newbuildings on order with eight Suezmaxes contracted at Jiangsu Rongsheng Heavy Industries, four VLCCs at Shanghai Waigaoqiao Shipbuilding, and six VLCCs on order at Zhoushan Jinhaiwan Shipyard.

“The instalments already paid on the cancelled newbuildings will be applied to and set off against future payments on the remaining newbuildings,” Frontline said. Jensen said Frontline was not paying any penalty charges for the cancellations. In the case of the Suezmaxes at Rongsheng, for example, the newbuildings were running behind schedule. Frontline had agreed to defer the delivery of the first four vessels in return for cancellation of the last four ships. The four Suezmaxes are expected to be seven-to-nine months later than originally scheduled.

Jensen said he did not expect any more cancellations in Frontline’s order-book although if there were more delays “you can never say never”. Frontline’s newbuilding programme now comprises four Suezmaxes and seven VLCCs worth $1.1bn.