John Fredriksen, the world’s wealthiest shipping investor, anticipates no recovery in oil-tanker markets for at least two more years, a senior executive at one of his companies said.
Markets for transporting refined fuels and dry-bulk commodities have better prospects than crude carriers, Fredriksen said in an interview with Reuters yesterday. Jens Martin Jensen, chief executive officer of Frontline Management AS, a company that operates the billionaire’s tankers, confirmed the remarks by e-mail today.
Owners of the vessels are contending with an oversupply that’s driven rates for the largest ships to the lowest this year since at least 1997, according to data from Clarkson Plc, the world’s largest shipbroker. Frontline Ltd., one of Fredriksen’s tanker companies, said it may need to raise cash to repay a convertible bond due in April 2015 if crude oil shipping markets don’t recover in the short term.
Prospects for oil-rig rates for the next three to five years are also better, Fredriksen said. He’s the largest shareholder in Seadrill Ltd., the biggest offshore drilling company by market value, through Hemen Holding Ltd.
LPG, Iron Ore
The billionaire split Frontline in two in December 2011 to withstand the slump in crude-tanker rates. That formed a new company, Frontline 2012 Ltd., which is assembling a fleet of vessels that will carry cargoes including liquefied petroleum gas and iron ore as well as oil.
“The freight market continues to show weakness,” Frontline 2012 said today as it reported a quarterly loss. “However, there is a clear indication that we have reached a level where rates are unlikely to decrease further.”
Frontline 2012 had a first-quarter net loss of $4.76 million, or 2 cents a share, after earning $2.43 million, or 2 cents, a year earlier, a statement showed. Sales fell 7.5 percent to $32.1 million.
Booking rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage slid 2.1 percent to 42.44 industry-standard Worldscale points, figures from the London-based Baltic Exchange showed today. Hire costs are down 9.1 percent this week, poised to decline the most since January. Each tanker can hold 2 million barrels of oil.
Daily earnings for the ships on the benchmark voyage fell 15 percent to $15,968, according to the exchange. Its assessments don’t account for owners’ efforts to improve returns by securing cargoes for return-leg voyages or reducing speed to burn less fuel, the industry’s biggest expense.
The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each individual voyage’s flat rate, expressed in dollars a ton, is set once a year. Today’s level means hire costs on the benchmark route are 42.44 percent of the nominal Worldscale rate for that voyage.
The biggest one-day change for ships hauling crude was for VLCCs heading to the U.S. Gulf Coast from the Persian Gulf, which declined 2.7 percent to 23.36 Worldscale points. For vessels shipping refined fuels, the largest move was for tankers heading to Europe from the U.S., which climbed 4.9 percent to 83.93 points, according to the exchange.