Frontline’s 'aggressive growth' a cause for concern
Thursday, 21 March 2013 | 16:30
Shipowner and charterer Noble Group, Asia’s largest commodities company, was already expressing alarm when head of chartering R. Raghunath met with Seatrade Global recently.
“We had thought the [dry bulk] market would pick up after 2014’ on account of demand starting to overtake a slowdown in tonnage growth, he explained. “But we may have to revise that now,” he added, specifically referring to Fredriksen’s intervention in the sector with a series of capesize orders in early 2013.
In its announcement yesterday Frontline 2012 revealed it held firm newbuilding orders for 53 ships worth nearly $2.6bn, suggesting it may have placed as many as 40 new orders since the beginning of the year. The company said it had further fixed-price options to declare in coming months, and was in discussion with other yards about further new orders. Newbuildings for delivery in 2014 and 2015 would be targeted, it said, along with a US listing “within two years”.
“Frontline 2012’s target is to position the company for an anticipated recovery of the shipping markets in the next two to three years,” the announcement stated. “In order to achieve this, the company follows the strategy of aggressive growth through placing large orders for new efficient tonnage at historically low prices with the main focus on crude tankers and dry bulk.”
Source: Seatrade Global
nikk I just read a report on VLCCF on seeking alpha and they were saying that VLCCF has switched from crude to dry and making money because of it. They own now only four dry ships and one last VLCCF that they are trying to sell. They too said that in the next 2 years a recovery in the shipping sector should start to happen with Dry bulk being Good now. VLCCF is paying almost 9% dividend and has positive cash flow and 90 million of cash so they like it. I have a position in that co. but I doubt that I will add.
It seems that Mr. F throws a lot of money into what ever he wants and changes the whole outlook of that area.
FRO seems to be an old Mr. F float that he will do something with at some time just when and what remains to be seen but the stock seems to have found footing and drifting back up toward the 3 buck price. It may take a while to get there but I pleased with my gamble on them. So far so good.
Yeah, if nothing else they should change their ticker from VLCCF to anything else. I think that eventually Fredriksen will have consolidated his companies to 4; SFL as the finance arm, FRO/FRO2012 for shipping, SDRL for his rigs and that fish farming deal he has. Knightsbridge & Golden Ocean will just die on the vine.
It looks to be an even tougher market for companies holding lots of older ships. The newer ships require much less fuel, and much smaller crews. Interest rates are so low, that finance costs coupled with higher efficiency makes buying new ships and just anchor the older tubs a winning business strategy.
There are really no older ships with large crews. Besides, crews' wages and benefits are hardly even found in the overall cost of running a ship today. Remember, in the 1950's and 1960's, T-2's were everywhere. Crews were 45 men on each of them and the tanker carried 110K bble max. Since the larger tanker buildout in the 1970's and 1980's tankers grew to carry a million barrels with a crew of 16-18, sometimes less, so even though crew members wages went from $700/mo for an American seaman to an American seaman making $3500/mo or a Filipino now making $1000/mo with no retirement or bennies, the crew wage/benefit package on these ships now can hardly be found in the overall cost. Fuel, insurance, building costs, demurrage, pilotage costs, etc repairs, etc are where the costs are now. Most of the tanker companies have very very few shoreside employees unlike the container industry. As far as fuel reduction costs, steam tankers are long long gone and have been for decades, and the big diesels have been very economical for a long time as far as fuel costs are concerned compared to the old steam tankers. Where there is savings in newer ships is on the insurance liability end, although double hulled tankers have been the norm for some time now and difficult to find single hull tankers. Besides, oil companies just like to screw everyone. It is in their nature.