HMM drops options for VLCCs at DSME

South Korean owner has decided not to confirm tanker options after failing to secure long-term charters

South Korea’s Hyundai Merchant Marine (HMM) has dropped options for VLCC newbuildings worth $419m.

The diversified owner and operator has passed on the rights to order five 300,000-dwt VLCCs at compatriot DSME as it has failed to line up charter contracts for the crude carriers.

Shipping sources familiar with HMM said the company — led by chief executive Yoo Chang-keun — had decided to drop the optional newbuildings at the Okpo-based shipyard because it could not secure financing for the large tankers.

The vessels were scheduled for delivery between the end of 2019 and the first half of 2020.

“The deadline for exercising the option units was due in end January but the company had it extended by another month to end February,” one shipping source said. “It recently decided not to exercise the optional units as the company’s lenders insisted that the newbuildings are to be placed on the back of employment contracts. It did not manage to seal any fixtures for the quintet.”

An HMM official confirmed that the company had dropped the VLCC options, without going into details.

5c870cf8165f30703f2186b002440525 Yoo Chang-keun, chief executive of HMM Photo: HMM

The options were part of the Seoul-based shipowner's order for five firm units booked at DSME in September last year, for a reported price of $83.8m apiece. According to Clarksons, HMM will take delivery of those VLCCs between February and September 2019.

Tanker market sources said three of the five VLCCs had found employment already. Two are fixed out to GS Caltex over a five-year period, while the third vessel is employed by a non-South Korean charterer. HMM has a plan to trade the other two charter-free VLCC newbuildings in the spot market.

DSME may have lost HMM’s optional VLCCs but the shipyard recently landed a similar number of newbuildings from two European companies.

Greek shipowner Pantheon Tankers was reported to have placed an order for two units, while an unnamed player booked three ships. Investors in a newly formed project called Apollo were reported to be behind the deal.

Little is known about Apollo but sources in Norway tied the order to Monaco-based Norwegian investor Arne Fredly and his company, Apollo Asset. Fredly has not invested in shipping before and told TradeWinds he was not involved.

Meanwhile, in the liner business, HMM is planning to order up to 20 mega containership newbuildings soon.

According to shipbuilding players, the company is planning to ink eight vessels of 14,000 teu and a dozen units of 20,000 teu. They add that Korea Development Bank-controlled DSME is likely to build the containerships since the bank is also the major shareholder in HMM.

“There is a possibility that, besides DSME, another Korean shipyard may be involved in building the containerships for HMM as the owner wants to have all the vessels within six months of the delivery of the first ship,” one shipbuilding player said.