Tanker Seizures Seen Boosting Rates as Oil Companies Vet Owners (BLOOMBERG)
Tanker Seizures Seen Boosting Rates as Oil Companies Vet Owners
By Isaac Arnsdorf - May 30, 2013
Increasing seizures of oil tankers will help rates recover from record lows as oil companies and traders have to avoid struggling owners, according to Frontline Ltd., the company led by billionaire John Fredriksen.
Ten to 20 tankers risk being arrested by lenders and some already have been, Jens Martin Jensen, chief executive officer of Hamilton, Bermuda-based Frontline’s management unit, said on a conference call today. Oil companies and traders have to do more due diligence and avoid distressed owners, he said.
Owners have lost $27 billion since 2009 because they ordered too many ships before the global recession, and now some will struggle to retain crews and keep up maintenance, Intertanko, the largest trade group, said this month. As lenders arrest ships and oil companies avoid others with known financial problems, remaining owners will benefit from reduced competition, Jensen said.
“Less ships, higher rates,” he said. “It’s positive for owners of good standing that this is actually happening. It should probably have happened before.”
The global fleet of supertankers swelled 30 percent to 189.6 million deadweight tons since rates peaked in 2007, according to Clarkson Plc, the world’s largest shipbroker. Average daily earnings plunged 74 percent in the past year to $8,429, its figures show. Rates averaged $4,209 so far in 2013, heading for the lowest since at least 1997, Clarkson data show.
Frontline (FRO) said its 32 supertankers, known in the industry as very large crude carriers, need $25,500 a day to break even. The company today reported a first-quarter net loss of $18.8 million, or 24 cents a share, after earning $7.18 million, or 9 cents, a year earlier. Frontline said in a statement it may run out of cash if the market doesn’t recover and it can’t sell assets or raise equities, reiterating comments made Feb. 22.
quant - true indeed. The only silver lining is that scenario is the time required to foreclose on the ships, and flip them to private equity. During that time, which is what the entire sector needs, more ships will be taken out of service.
I assume what FRO is talking about are VLCCs, which are losing money faster than the other classes of ship. TNK has some insulation in that there are certain routes, and ports, where VLCCs do not work.
Speaking of VLCCs, spot are on a bit of an upswing, long may it last, as TNK is now the proud owner of two of these giants.