SHIPPING

Oil tankers facing five years of pain before rebound

Oil tankers may be unprofitable for five more years before a glut that caused a 95 percent slump in returns since 2008 is eroded, according to Tor Olav Troeim, a director at Frontline Ltd., the biggest supertanker operator.

Returns on supertankers that reached $177,036 a day in July 2008 were last at $8,900, according to the London-based Baltic Exchange, which publishes daily rates for more than 50 maritime routes.

Frontline, based in Hamilton, Bermuda, needs $30,100 a day to break even on its supertankers, according to a presentation to investors in February.

“We have to go through a lot of pain before we’re back into profitable territory,” Troeim, who is as an alternate director at Frontline and is on the board of several other shipping companies, told a conference in Oslo today. “We have just started on a down-cycle that will be brutal.”

The surge in rates in 2007 and 2008 spurred owners to order more ships, on the eve of the worst global recession since World War II.

Those vessels are now leaving shipyards, meaning the tanker fleet will expand 7.4 percent this year, compared with a 3.1 percent gain in demand, according to the research unit of Clarkson Plc, the world’s biggest shipbroker.

Oil-tanker owners have responded to the slump in rates by cutting their speeds from an average of 10.8 knots in July 2008 to 8.8 knots now, according to ship-tracking data compiled by Bloomberg.

There are more than 600 tankers anchored globally, up from about 350 three years ago, the data show.

The glut will take time to erode because only 10 percent of the fleet is above 15 years old, reducing the speed of demolitions, Troeim said in an interview after his speech. By contrast, a quarter of the dry bulk fleet hauling coal and iron ore is above 20 years old, he said.

The slump in dry bulk shipping may be over in three years, Troeim said.

The Baltic Dry Index, a measure of commodity shipping costs, slumped 65 percent in the last 12 months, according to the Baltic Exchange.

Troeim’s outlook for oil tankers contrasts with that of Peter Evensen, chief executive officer of Hamilton, Bermuda- Teekay Corp. (TK), which operates vessels hauling oil and liquefied natural gas. He’s forecasting a rebound in rates for aframaxes, capable of carrying about 600,000 barrels of oil, next year.

“I’m optimistic,” Evensen told the conference.

“We’ve gone through the low and we’re coming out of it.”

Shares of Frontline fell 6.3 percent to 105.4 kroner in Oslo trading, extending this year’s decline to 30 percent and valuing the company at 8.2 billion kroner ($1.5 billion).

The market can get “a lot more consolidated than it is now,” Troeim said.

“Normally consolidation works when people have problems and that’s what we’re having these days.”

LNG shipping should fare better because demand is expanding faster than ship supply, he said. “There is 9 percent coming in the next three years and we have a growth rate of 12-15 percent, so effectively the whole market is eaten up by one year of demand,” he said. Bloomberg

Colombo Engineering completes heavy job in six days

Abu Dhabi owned Cargo Vessel ‘Al Jabber XV’ called at the Colombo Port recently with a consignment of fertilizer to Sri Lanka.

The vessel arrived in Colombo requiring heavy steel repairs to its Cargo Cranes. After discharging the Cargo the Vessel was to proceed to India to pick-up some Cargo and deliver same to Vietnam and therefore the owners of the vessel were considering the options whether to do the repairs in Sri Lanka or India.

But due to the aggressive marketing strategies adopted by Colombo Engineering who convinced the ship owners to perform repairs in Colombo gave the ship owners a firm assurance of completing the repairs in six days.

Initially the vessels’ owners decided to carry out repairs only to one single crane and after the performances shown by the technical and operations staff of Colombo Engineering the vessel owners decided to get all their cranes repaired in Colombo which was completed in six days and brought in foreign exchange.

Activists insist on new Gaza flotilla

A new international flotilla is determined to challenge Israel’s blockade of the Gaza Strip despite Egypt’s decision to re-open its border with the Palestinian enclave, organisers said Monday.

“While we wholeheartedly welcome the decision of the Egyptian government to regularly operate the Rafah crossing... Israel’s unlawful blockade remains in effect,” Vangelis Pisias, the Greek coordinator of the initiative, told reporters.

“Israel still prevents Palestinians from using their sea, and controls and severely restricts all goods entering and exiting Gaza. As such, we must continue to challenge this blockade.”

Fifteen ships will leave for Gaza from various Mediterranean ports around June 20, he added. Some 1,500 activists from about 100 countries will board the vessels, which will also carry humanitarian aid, medical equipment, school supplies and construction materials, including up to 700 tonnes of cement, said Huseyin Oruc, a senior member of the Turkish Islamist charity IHH.

AFP

New CSC GM

Ceylon Shipping Corporation Ltd has appointed Sunil Obadage, Deputy General Manager (Business Development) as its General Manager from May 10. Obadage has 30 years experience in the field of shipping and logistics.

During this period he has served in overseas shipping companies in senior executive positions for over 13 years. He is a graduate from the Colombo University and holds a Post Graduate Diploma in Professional Shipping from the Norwegian Shipping Academy, Oslo.