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Billionaire John Fredriksen Says `Won't Be Much Money' in Shipping For Now
John Fredriksen, the billionaire chairman of the world’s biggest operator of supertankers, said there “won’t be much money to earn” in shipping in the next two to three years after owners ordered too many ships.
Daily rates for supertankers carrying Saudi Arabian oil to Japan, the industry’s benchmark route, have slumped 88 percent to $10,273 a day since their 2010 high in January, according to the Baltic Exchange in London. The global fleet of the ships, known as very large crude carriers, will expand 4.9 percent this year, more than the anticipated gain in demand of 3.9 percent, according to Clarkson Plc, the world’s biggest shipbroker.
“I’m negative to shipping, I’ve been that for a while,” Fredriksen, head of Frontline Ltd., told reporters at a Pareto Securities ASA conference in Oslo today. “Tanker rates, I don’t have much belief in.”
Shipping lines ordered the largest number of supertankers since the 1970s in the last several years as the fleet failed to keep pace with global oil demand that expanded for 14 consecutive years through 2007. Rates slumped from $177,000 in July 2008 amid the worst financial crisis since the Great Depression. Crude consumption last year fell the most in more than a quarter century, according to BP Plc.
Fredriksen said there was “too much contracted on bulk and tanker,” in a later interview.
Oil Rigs
Frontline warned on Aug. 27 that its earnings this quarter would be “materially lower” than in the prior three months. The company is rejecting cargoes on the benchmark route because the trade is no longer profitable, Jens Martin Jensen, chief executive officer of Frontline’s management unit, said Aug. 23. VLCCs need $11,601 to pay crew, repairs and other running costs, according to London-based Drewry Shipping Consultants Ltd.
Hemen Holding Ltd., indirectly controlled by trusts created by Fredriksen for his family, owns 33.8 percent of Frontline, according to a Feb. 28 filing to the Securities and Exchange Commission. Hemen Holding also has stakes in companies including Seadrill Ltd., an oil-rig firm, and Golden Ocean Group Ltd., a shipper of dry bulk commodities such as iron ore and coal.
While rates may be declining, Frontline “is in good shape,” Fredriksen said. “For the most part we have secured against most of the downside both in dry bulk and tankers.”
Rental income from the Saudi Arabia to Japan route advanced 3.2 percent today, according to the Baltic Exchange. It reached $88,345, the highest this year, on Jan. 19.
Frontline declined 0.2 kroner, or 0.1 percent, to close at 167.5 kroner in Oslo, valuing the company at 13 billion kroner ($2.1 billion). The shares gained 3.4 percent this year, better than the 8 percent slump in the six-member Bloomberg Tanker Index.
To contact the reporter on this story: Alaric Nightingale in London at anightingal1@bloomberg.net; Marianne Stigset at mstigset@bloomberg.net
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