Billionaire Fredriksen Almost Doubles Ship Orders Amid GlutSubject
By Rob Sheridan - Mar 19, 2013
Frontline 2012 Ltd. (FRNT), the shipping company led by billionaire John Fredriksen, almost doubled the number of vessels it’s building at a time when the maritime industry is contending with record low earnings and a glut.
Orders for new ships increased to 53, from 28 at the end of last year, the Hamilton, Bermuda-based owner said in a statement today. While the market is “massively oversupplied” in some cases, Frontline 2012 placed orders for fuel-efficient carriers after construction prices slumped, it said.
The ClarkSea shipping index, a measure of vessel earnings across the industry, averaged $8,284 a day in February, its lowest on record, according to Clarkson Plc (CKN), the world’s largest shipbroker. Rates will start to recover in three years and Frontline 2012 is ordering vessels to carry crude, refined products, liquefied petroleum gas, coal and iron ore, it said.
“It is the shipping company you want to own as we move through the trough of the shipping cycle,” Erik Nikolai Stavseth, an analyst at Arctic Securities ASA, said in an e- mailed note today. The owner will place more orders, he said.
Frontline (FRNT) climbed 2.6 percent to 39 kroner as of 1:24 p.m. in Oslo trading. Frontline 2012 will list in New York in 10 to 16 months, according to the statement.
“The company is currently in the process of concluding one of the most aggressive newbuilding programs ever executed,” Frontline 2012 said. Most of the new carriers will be profitable at rates where “existing tonnage barely covers operating costs,” it said.
An oversupply of supertankers competing for 2 million- barrel cargoes of Persian Gulf oil is poised to decline over the next 30 days, according to a Bloomberg News survey today.
There will be 17.5 percent more very large crude carriers available in the Persian Gulf over the next 30 days than there will be probable cargoes, the median estimate of six owners and shipbrokers showed. That’s 2.5
Fredriksen is a genuis. When rates recover he will have the largest and most modern fleets in the industry. He is buying now, when shipbuilding costs are the lowest they have been in a generation. 2 years ago he dumped all of his older ships in the old FRO. These are the things you can do when you are one of the richest men in the world and you understand shipping cycles better than anyone else.
TK is trying to do the same thing on a smaller scale and in a more conservative way. They are having TNK conserve cash now by reducing the dividend, and have announced that they will be placing orders for new more modern ships so as to be ready in a few years when rates turn around. They have also been disposing of their older ships on a regular basis. FRNY has Fredriksen to bankroll its moves, TNK has its parent TK.