Chinese Leasing Company Offloads Vintage Storage VLCC for Recycling
Chinese leasing firm Minsheng Financial Leasing has sold the ageing floating storage and offloading (FSO) vessel SA Equatorial (built 1997) for recycling after years of service as a stationary storage unit. The vessel, originally constructed as a very large crude carrier (VLCC), had been used as a floating storage facility off the Malaysian coast for the past seven years.
The 300,300-deadweight-ton (dwt) vessel was sold to Ship Recycling Investments, a company linked to cash buyers specializing in ship demolition. The sale was conducted on an “as-is” basis, with the vessel handed over at the Tanjung Pelepas anchorage in Malaysia.
End of an Era for a Floating Storage Unit
The SA Equatorial had a long and storied career, beginning its life as a crude oil tanker operated by Overseas Shipholding Group (OSG), a prominent U.S.-based shipping company. In 2018, it was converted into an FSO and anchored off Malaysia, where it played a key role in offshore oil storage and offloading operations.
Minsheng Financial Leasing acquired the vessel as part of its maritime investment portfolio. However, with the termination of its lease to an undisclosed offshore storage operator, the company opted to sell the ageing asset for recycling rather than pursue another lease extension or costly refurbishment.
Industry sources indicate that the SA Equatorial was no longer commercially viable for continued service due to its age and the increasingly stringent environmental regulations governing older tankers.
Rising Trend of VLCC Recycling
The decision to sell SA Equatorial for scrap comes amid a growing trend of shipowners and leasing companies retiring older VLCCs. With tightening emission regulations from the International Maritime Organization (IMO), particularly the Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) requirements, many older crude tankers and FSOs are being phased out.
Recycling rates for such vessels have been steadily rising, with demand for scrap metal driving prices upward. Market analysts suggest that recycling values for large tankers are currently hovering around $550 per light displacement ton (LDT), making scrapping an attractive option for ageing vessels.
The Role of Ship Recycling Investments
Ship Recycling Investments, the buyer of SA Equatorial, is known for acquiring end-of-life vessels and delivering them to approved demolition yards, primarily in South Asia. While the final destination of the vessel has not been disclosed, industry insiders suggest that it will likely be dismantled at one of the major shipbreaking yards in India, Bangladesh, or Pakistan.
Regulators and environmental groups closely monitor the disposal of such vessels due to concerns about hazardous waste management, particularly in South Asian shipbreaking yards, where working conditions and environmental practices have been criticized in the past.
Minsheng’s Strategic Move in Maritime Leasing
Minsheng Financial Leasing, a subsidiary of China Minsheng Bank, has an extensive portfolio in shipping finance, including vessel leasing agreements with international operators. The company has been active in both conventional and offshore energy shipping sectors but has been gradually adjusting its investment strategy in response to evolving market conditions.
By offloading the SA Equatorial, Minsheng is likely streamlining its fleet composition and reallocating resources to newer and more efficient assets. The sale aligns with a broader industry trend where financial leasing firms are reassessing their exposure to ageing offshore storage units amid volatile oil markets and regulatory shifts.
Future of Floating Storage Market
While the demand for floating storage solutions remains strong—particularly during periods of oil price contango, where storing crude for future sale can be profitable—the market is shifting towards newer and more energy-efficient vessels. Floating storage units converted from ageing VLCCs are gradually being replaced by purpose-built FSOs and floating production storage and offloading (FPSO) units equipped with modern emission-reducing technologies.
Oil majors and offshore operators are also becoming more selective in chartering floating storage units, prioritizing vessels that comply with IMO environmental standards. The phase-out of older units like the SA Equatorial signals a broader industry shift towards sustainability and regulatory compliance.
Conclusion
Minsheng Financial Leasing’s decision to sell the SA Equatorial for recycling marks the end of its operational life after decades of service in crude oil transport and offshore storage. As regulatory pressures mount and ship recycling activity gains momentum, more aged VLCCs are expected to follow a similar path.
The recycling of older vessels remains a crucial part of fleet renewal in the global tanker industry, ensuring that shipping capacity is optimized while aligning with stricter environmental mandates. For Minsheng, this strategic divestment allows the company to focus on modern, compliant assets that meet the evolving needs of the maritime sector.
