Tanker owners need to pool fleet to arrest freight rout

MANILA, Philippines — Owners of at least 100 of the world’s largest oil tankers must form a combined fleet and sell their services jointly to raise depressed freight rates, said ACM Shipping Plc.

“There are some advantages for owners to consolidate for a short period of time,” John

Plumbe, chief executive officer of the London-based shipbroker, said in an interview. Joint sales of transportation services under a commercial arrangement known in the industry as a shipping pool can “lift the market slightly,” according to the CEO.

A glut of very large crude carriers has depressed returns, sparking industry-wide reorganization and bankruptcies among owners as earnings plunge to the lowest levels in more than a decade, draining cash flows. Frontline Ltd., the top global VLCC operator, said last week it may run out of cash and breach loan terms as earnings stay below its cash break-even levels amid declining demand growth for crude.

“In order to have any real effect on freight rates in the VLCC market, you need a pool of a minimum of 100 ships, as there is a fleet of 600 trading,” said Plumbe. He has worked for 37 years as a tanker broker.

Tankers International LLC, a Marshall Islands-registered company that is commercial manager of the world’s largest VLCC pool though an agency in London, has 43 vessels, its website shows. The tankers are owned by seven companies including Overseas Shipholding Group Inc. and Euronav NV, according to the site. Chief Executive Officer Jon Birkholm declined to comment.

VLCC rents averaged $11,372 a day in the third quarter, the lowest since at least 1997, according to data from Clarkson Reesarch Services Ltd., a unit of the world’s largest shipbroker. Operating costs excluding fuel are between $10,000 and $12,000 daily, Plumbe said.

He spoke as ACM reported a first-half loss for the first time since going public in 2006. Earnings from brokering single- voyage tanker charters were flat even as bookings rose, with rates at “historically low levels,” the company said in a statement. ACM earns 1.25 percent commission as a broker from freight rates for ship hires, Plumbe said.

“I think there will be more pain to come,” the CEO said of the tanker market. Brokering single-voyage tanker contracts generates 52 percent of sales, according to the statement.