John Fredriksen's tanker company Frontline has secured time charters of more than a year for its oldest VLCCs.
An undisclosed charterer has taken the 300,000-dwt Front Vanguard, the 311,000-dwt Front Century (both built 1998) and the 306,000-dwt Front Circassia (built 1999) on charter from February until their next docking in the second quarter of 2016.
The intention is to use the ships to store oil.
TradeWinds sources suggest the rate is some $43,000 per day.
The team led by Eirik Haavaldsen raised its rate projections amid suggestions between 20 and 30 VLCCs could be locked into storage deals as traders look to exploit contango in the oil price.
In an update on the tanker market, Pareto said floating storage was changing 2015 from being promising to very good.
“While we three months ago would have urged investors to considering taking profits at current share price levels, we now believe the strong rate environment will last longer than last year, and thus see further upside across the board,” Haavaldsen and colleagues Nicolai Hansteen and Oystein Dalby said.
For 2015, Pareto Securities now projects VLCC spot rates of $45,000 daily, up from the $35,000 per day previously charted. This includes an expectation that 20 VLCCs will be taken out of the market on storage deals.
For 2016, its expectations are for spot rates of $40,000 daily as storage vessels return and newbuilding deliveries pick up.
Haavaldsen, Hansteen and Dalby say the belief that 2015 will be better than 2016 is something few would have anticipated a couple of months back.
“This will be beneficial to the companies with vessels in the water, and we expect both resale and second hand values to increase this year – with values of 5Y old VLCCs and suezmaxes expected up 10% and 15% respectively,” the trio said.
The update, in which Pareto kept its buy rating on crude tankers, said 2015 is expected to be the year of consolidation. This follows the year of hope in 2013 and the year of recovery in 2014.
“We expect further merger and acquisitions this year, as investors’ taste for size will be difficult to ignore,” the analysts said.
Genmar’s pending purchase of Navig8’s 14 newbuildings, a potential combination of Teekay Tankers and TIL, further growth at Euronav and a belief that John Fredriksen “will gather his tanker-troops this year”, were all noted.
“Among other non-listed names we could see both industrial groups with size, experience and history such as Quantum aim for the public markets,” Pareto said.
“Private equity backed shipowners such as Ridgebury, Principal Maritime or Diamond S make their moves, either alone or in joint efforts in order to gain size.”
The Board of Nordic American Tankers Limited has declared a cash dividend of $0.22 per share for 4Q2014. The cash dividend for 3Q2014 was $0.14 per share. The record date is January 22, 2015 and the payment date is on or about February 9, 2015.
Activity in the MEG was relatively healthy this week, which has helped to absorb some of the excess tonnage. However, the rate on the Gulf-Japan route decreased to WS 60. Meanwhile, despite competition from ballasters from Europe and the East, the rate on the WAF-China route remained steady at WS 62.
With the tonnage list looking relatively thin, owners have driven up rates across all featured routes, with the rate on the WAF-USAC route rising to WS 107.5. Suezmax average earnings rose 9% w-o-w to $61,162/day.