Dubai-based United Arab Chemical Carriers (UACC) is bullish about its chemical and product tanker fleet as the Middle East, and especially the GCC, continues a massive refinery build-out that should add at least 3.3 million barrels per day of capacity to regional output by 2018.

UACC ceo Per Wistoft cited the data, provided by ICAP Shipping International, as strengthening the core rationale of the company of transporting Middle Eastern refined products to the rest of the world.

“If you look at time-charter rates that product tankers are earning today, it’s a very strong market. It’s the strongest market we have had for maybe five years,” Wistoft told Seatrade Global recently. “[Middle East] refinery capacity has now reached a level where, when refineries are running at their normal output, there is a very close balance between supply of vessels and demand for them.”

The tanker market has enjoyed a huge year-end rally across the board. VLCC rates have flirted with the $100,000 a day mark, according brokers C R Weber. In the product tanker sector EA Gibson noted MR’s have been able achieve rates of $29,000 per day through triangulation, with LR2’s achieving $24,500 a day in the second half trading the Arabian Gulf–Japan, while LR1’s saw $19,500 a day in the period which it said were the highest since 2008.

The addition of new capacity over the next four years will only add to UACC’s ability to improve the business. Tonne-mile demand is on the up, meaning that more refined products need to be transferred greater distances to reach market, allowing tanker owners to utilise their vessels more efficiently.

To meet the demand, the company has taken delivery of five secondhand vessels since Wistoft took over as ceo in September 2013: one MR product tanker and four MR chemical vessels, a number of them from Malaysia's MISC.

Of a fleet today of 21 vessels, UACC owns 18 of the vessels and has another three itself on charter. “We control 21, and three of them are on bareboat charter,” Wistoft said.

Wistoft has four ships out to the Straits Tankers pool in Singapore, eight on time charter and nine on the spot market. “It’s a question of weighing up risk,” said Wistoft of the decision to which use to put the vessels in the UACC fleet.

While UACC retains the coo and cfo functions in-house, it is not a fully integrated shipping company. “We have outsourced the management of our ships to three different technical managers,” Wistoft said. UACC employs Executive Ship Management of Singapore, Fleet Management of Hong Kong and Selandia of India for the technical management of its fleet, he said.

The company has not recently looked at the market for newbuilds, as Wistoft said it was today at a “level where it was prohibitive to contract” for them. He said valuations for tankers were difficult to arrive at due to different specifications, different yards and speed consumption. As a broad rule of thumb, he estimated the benchmark value of a five-year-old MR tanker at $25m.

Wistoft said that while bunker prices were today half what they were three-to-six months ago, slow steaming continued to affect the entire industry, and that for his fleet, this meant average speeds of 12-13 knots, where 14-15 knot speeds would be employed in ‘normal’ circumstances.

“Falling crude prices will help much of the rest of the world to have better economic growth,” he said.

He said that the optimal utilisation rate that chemical tanker operators could achieve in terms of moving cargoes around the world, as opposed to steaming unladen, was around 65%. “Some vessels do much better than that,” he said.

He said UACC today had around $326m of long-term debt on its balance sheet, more than doubling FY2012 levels. In May, UACC announced that it had secured a $300m term loan from six international banks.

According to UACC’s website, the fleet, composed of MR and LR1 chemical and product tankers, consists of 21 vessels, ranging in deadweights from 45,249 to 73,427 dwt.

“We still see clear signs that the average tonne of clean petroleum or petrochemical cargo is transported longer before reaching the end consumer [“tonne-mile” is increasing], than it did before,” wrote Jens Groenning, Wistoft’s predecessor as ceo, in UACC’s 2012 annual report.

“This is thanks to the state-of-the-art refineries and petrochemical plants coming on line in the Arabian Gulf and India, at the same time as similar plants are closing down in the West.”

UACC made net losses of $9.7m and $8.3m in 2013 and 2012 respectively, but did not publish an annual report in 2013, and as a private company is not obliged to do so. When Seatrade Global put it to Wistoft that this was a sign of distress, he responded: “Quite the reverse.”