VLCC Newbuilding Economics

Break-even economics · IRR analysis · Capital structure & OPEX scenarios · by TankerCompass

Capital structure

Newbuilding price ($M) $128M

Equity (%) 25%

Loan rate (%) 7.5%

Loan term (years) 20 yrs

Operations — FRO OPEX: $9.6k/day · OET OPEX incl. mgmt: $8.3k/day (Q4 2024)

Technical OPEX ($/day) $9,000

$5kFRO $9.6kOET $8.3k$16k

Management fees ($/day) $1,000

$0 (in-house)~$750–1,500 (outsourced)$3k

Trading days/year 340

Vessel lifetime (years) 20 yrs

Drydock cost ($M, every 5 yrs) $4M

Residual value

Scrap value at end of life ($M) $20M

Scrap value based on ~44,000 LDT × $415–425/LDT (Bangladesh/India, Jan 2026). Jefferies analyst confirms ~$20M for 18yr old VLCC (Dec 2024). Ranges from $15M in weak steel markets to $28M at peak (2022: $680/LDT).

Return on equity

Required IRR on equity (%) 10%

6% (low)10% (standard)15% (PE)20% (aggressive)

Industry standard hurdle rate is 10–12% for shipping equity. FRO break-even ~$25k/day (Q4 2025) reflects low residual debt on existing fleet — not a newbuild scenario.

Industry standard hurdle rate is 10–12% for shipping equity. Private equity targets 15–20%. Conservative family office / long-term owner: 8–10%.

Minimum break-even TCE rate required

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per day, averaged over lifetime

Rate required for target IRR on equity

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per day · the key investment question

Total cost

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Over lifetime

Debt service

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$/day avg

OPEX + Mgmt

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$/day

vs. historical 1yr TC rates

Historical averages: Clarksons 2000–2024. All observations with 1yr TC above $65k have historically yielded negative 3yr equity returns without exception.

Cost breakdown ($/day avg)

Sensitivity — 10% IRR rate by OPEX & loan rate

Sources: Clarksons benchmark $128M newbuild (320,000 DWT, March 2026) · Baltic Exchange OPEX/G&A standard · Jefferies/Nokta scrap estimate Dec 2024 · Hist. 1yr TC avg $41k/day (2000–2024). Not investment advice.