Former trader and founding director of AG Shipping & Energy Mangish Kakodkar discusses the opportunities that the 2020 sulphur cap offers, ahead of the Asian Tanker Conference
Mangish Kakodkar, global head of AG Shipping & Energy, will be participating in the much-anticipated panel discussion on the tanker market outlook at this year’s Asian Tanker Conference, held in Singapore on 26-27 February.
Mr Kakodkar has been based in Singapore for a number of years, but does not regard himself as a traditional shipowner. His company, which he says “has humble beginnings”, is an industrial gas trading operation serving local companies, also with operations in industrial chemical trading and supply, backed by a logistics operation.
Mr Kakodkar has a background in trading, experience which he feels has helped him spot some of the hidden opportunities lurking in the details of the IMO sulphur cap. In early 2018, with the backing of an unnamed (but widely reported) US equity group, AG Shipping & Energy purchased the 2006-built MR2 product tanker AG Mars (ex-Phoenix) for a reported US$15M. At the time, Mr Kakodkar told Tanker Shipping & Trade that: “Asset prices have [bottomed out] in the current cycle [and] that makes it favourable to enter this sector. Furthermore, we feel the Sulphur Cap 2020 will be disruptive for the shipping industry, with only 2% of the world fleet scrubber-ready.”
"The tanker market is very interestingly poised, with most owners having positive sentiments post 2020"
Since then, AG Shipping & Energy has taken another tanker into the fleet, the 2013-built LR1 tanker Crescent Glory, now renamed AG Neptune. Both tankers are backed by time charters to major oil companies, and a third tanker may be on the way.
Discussing the current tanker market and the prospects of a near-term recovery, Mr Kakodkar said: “The tanker market is very interestingly poised, with most owners having positive sentiments post 2020. This has also led to asset prices firming up across the sector and rates post 2020 being fixed at a premium.”
He went on to explain that MR prices troughed in 2017, which was his entry point. He now sees the regulatory upheaval associated with the sulphur cap as providing a fresh dynamic in the tanker market and believes positive sentiment will continue to build from the second half of 2019 into 2020.
As regards the supply of 0.5% sulphur marine fuel, Mr Kakodkar expects the impact on major ports like Singapore to be fairly limited. In his opinion, these intuitions will be ready to supply, whatever fuel is required.
On the subject of scrubbers, he feels owners will expect a payback period of 48 months, after which, the price differential will decline. There could be a point where the price differential is so small as to make the impact of the scrubber inconsequential. However, he noted that scrubbers are preferred by the larger consumers of marine fuel oil, such as charterers.
The Asian Tanker Conference is being held on February 26 and 27 at the Marina Bay Sands Expo and Convention Centre, located in the heart of Singapore’s city centre. The conference offers multiple opportunities to engage with an audience of peers, colleagues, clients, customers and industry experts. For more information, please click this link.