During a wide-ranging panel discussion on how tanker owners can remain competitive at the annual Tanker Shipping and Trade Conference in London, Euronav chief executive Paddy Rodgers was candid about current market troubles and what may be in store for the future.
Admitting that he would be speaking solely and “unashamedly” about the crude-carrying VLCC sector, his specialist area of expertise, Mr Rodgers outlined recent market movements.
After two or three years of very strong performance, he said, the market dropped. Why? Too many ships.
This, Mr Rodgers said, could be traced back to the switchover from single- to double-hulled ships that resulted in younger fleets and, ultimately, resulted in a dearth of vessels owners would consider worthwhile to scrap.
In short, he said, the market is unbalanced.
“It's like a drunk. By the time he's had his 10th pint, his head gets ahead of his feet, then all of a sudden he's running and he crashes.”
Mr Rodgers said that the best-case senario for the short-term – from his vantage point – was for the market to become bifurcated.
“Negative cashflows drive scrapping,” Mr Rodgers said, and if a scenario arose whereby operators with older tonnage saw negative cashflows, he said there are shipowners with newer fleets who would be perfectly happy with that.
The likelihood of that scenario occurring is very slim, according to Mr Rodgers, and he was clear that investing in older tonnage was not a wise move in current or foreseeable market conditions.
“The reality is there is going to be pain before we get gain.”
Mr Rodgers said there were structural problems within the tanker market that needed to be fixed. How to do that, he said, was a multi-tiered, but straightforward process.
“You need to get big ... so that you can raise money efficiently so that you have capital to invest ... The age of explosive growth is over. I don't see another massive growth phase like the one we've had in the last 40 years. That means you're going to have to work harder for your money.”
The Euronav chief executive spoke as part of a panel asking tanker owners to address how they will maintain their respective competititve advantages in late 2017 and through 2018. Other members of the panel included Braemar Shipping Services president Denis Petropoulos, Concordia Maritime chief executive Kim Ullman and Dania Ship Management chief executive Carsten Ostenfeldt.