Financial returns for tanker owners and operators globally have picked up in recent months but the outlook is still not conducive for investing in fleet expansion and the focus instead needs to be on replacing older ships, a key industry official said Wednesday, April 22.
“Earnings have improved but from the investment perspective in the long term they are still not good enough,” Hor Weng Yew, President and CEO of AET Tanker Holdings, told Platts in an interview on the sidelines of an international oil pollution conference organized by Singapore’s Maritime and Port Authority.
AET is a wholly-owned subsidiary of Malaysia’s MISC Bhd. and a major global shipowner and operator with a fleet of around 80 tankers including 13 VLCCs, 48 Aframaxes and four Suezmaxes.
MISC is a subsidiary of Malaysian energy conglomerate Petronas.
Platts assessed the key VLCC Persian Gulf to Japan route up w4 points day on day at a 12-week high of w67 Tuesday.
A month ago rates were struggling to stay above w50 but brokers said even then daily earnings on the route for owners were around $40,000.
They are now close to $62,000, compared with $12,000 an year earlier, they said.
It is difficult to forecast whether the current freight rate level is sustainable because of the possibility of unforeseen developments, Hor said, citing the example of the oil sector, where the major impact of “the shale revolution” on oil supply and trade flows has been felt only in the last few years.
“We are cautiously optimistic about the tankers outlook for the next two to three years,” he said, adding that the company’s current fleet size was adequate to meet the needs of Petronas.
On the macro outlook, Hor said the global supply of tankers was under control but demand for newbuilds was increasing.
According to shipping industry estimates, the global tanker fleet expanded by more than 20% in the past five years in terms of deadweight tonnage, while oil consumption rose around 9%.
PHASING OUT OLDER SHIPS
Hor said investment in greenfield expansion cannot be based on daily movements in freight rates.
He said AET Tankers was instead focused on continuously renewing its fleet by phasing out older ships and replacing them with new ones.
“We are renewing our fleet regularly to ensure sustainable operations and maritime safety and the industry as a whole also needs to do the same,” he said, adding the company had purchased four Suezmaxes in 2012 and four VLCCs in 2013.
“AET plans to do the same in Aframaxes as well,” he said.
These ships typically carry 80,000-100,000 mt cargoes and many in company’s fleet are more than 15 years old, according to data on its website. Asked about recent reports that AET Tankers was in talks for a possible merger with Teekay, Hor said: “Industry participants keeping talking about mergers and acquisitions all the time but one shouldn’t believe in rumors”.