The product tanker market is exhibiting levels of dysfunction never seen before in the prelude to IMO 2020. Top product tanker owners reveal the cause and mull over how they would spend US$50M
The owners and operators on the product tanker panel at the 12th Annual Capital Link Shipping & Marine Services Forum held during London International Shipping Week felt the current situation has its roots in two main factors. The announcement from the US that it was ending its waivers on Iranian sanctions and that OPEC opened the crude oil production taps, releasing more oil on the market. This increased the throughput of crude oil through refineries, producing more oil products onto the market.
By contrast, at the end of 2018 and the start of 2019, the product tanker market experienced a boom due to the increase in oil products on the water.
This came to a halt in Q2 2019 when the refineries went into the maintenance season. This lasted longer than normal, agreed the owners and operators on the product tanker panel at the 12th Annual Capital Link Shipping & Marine Services Forum held during London International Shipping Week.
Concordia Maritime chief executive Kim Ullman pointed the finger at refinery overhauls. “Refinery throughput in May 2019 was lower than in May 2018. We believe this was due to (refinery) preparation for IMO 2020.”
This has led to an unexpected situation in some ports where bunker traders have drawdown stocks of high sulphur marine fuel in the run up to 1 January 2020. With the longer than normal refinery maintenance season, lower output and diminishing stocks, high sulphur marine fuel is facing a shortage in some ports.
“We are seeing higher prices for high sulphur versus low sulphur fuel marine fuel,” said d’Amico International Shipping’s chief financial officer Carlos Balestra di Mottola.
This has led to MR product tankers undertaking longhaul voyages with high sulphur marine fuel to restock some the smaller ports seeing a shortage of fuel.
LISW had plenty of discussions regarding IMO 2020 and to lighten the mood a little, the moderator, Jefferies LLC maritime shipping group head, equity analyst Randy Giveans gave each of the panellists US$50M to invest as they wish. What would they do with US$50M?
Mr Ullman, “Buy MR tankers.”
Mr Balestra di Mottola, “Buy back our shares. We are trading at a big discount to NAV and maybe exercise the options to buy back sale and leaseback vessels.”
Torm chief executive officer, Jacob Meldgaard, “We already have plenty of cash. I would add the US$50M to the cash box.”
Scorpio Tankers managing director David Morant, “I would buy modern MR or newbuild resales, and maybe reduce (the company’s) leverage.”
Check out the latest services and equipment ahead of the implementation of IMO 2020 at the Asian 2020 Sulphur Cap Conference in Singapore (15-16 October 2019).