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Tanker Shipping & Trade

Tanker Shipping & Trade

In the shadow of a giant: Denmark and Sweden fleet profile

Wed 13 Jun 2018 by Craig Jallal, tankers and markets editor

In the shadow of a giant: Denmark and Sweden fleet profile
The outlook for pools is sound; they are a great way of obtaining scale and market intelligence through consolidation

The prevalence of Maersk Tankers can steal the limelight from the region’s other big names, but they are equally busy innovating to keep up

The Swedish and Danish tanker scene is dominated in almost every conceivable way - number of tankers, tonnage, asset value - by the goliath that is Maersk Tankers.

Although the name is familiar, Maersk Tankers is actually a new entity, only coming into being in September 2017, when AP Møller-Maersk sold its Maersk Tankers division to the AP Møller Holding subsidiary Apmh Invest A/S, in an all-cash restructure totalling US$1.1Bn.

In March 2018, the European Commission approved the sale. Under the terms of the deal, Maersk Product Tankers A/S is a joint venture between Apmh Invest A/S of Denmark and Mitsui & Co, Ltd of Japan.

In reality, Maersk Tankers comes under the majority control of the relatives of the founder of Maersk and is no longer a division of the larger Moller-Maersk entity. This is not to say that Maersk Tankers will not be floated on the Copenhagen or even one of the New York stock exchanges one day. With an asset value in the region of US$1.3Bn, and notwithstanding the dire NAVs ascribed by investors to publicly listed shipping companies, Maersk Tankers already has a potential market cap larger than any crude oil or product tanker company currently listed in New York.

According to VesselsValue, Maersk Tankers has a fleet of 82 product tankers, with 12 on order and two soon to be delivered. Including the vessels operated in pools and on timecharter, Maersk Tankers controls 164 vessels. Nearly all operate in various pools, including the Handytankers Pool, LR2 Pool, and the Maersk Intermediate Pool.

The second largest tanker company in the region is Torm, with 84 tankers, including 57 in the MR2 product tanker sector. Torm is listed on the Copenhagen Stock Exchange and in December 2017, the company’s A shares were also listed on NASDAQ in New York. This was followed by a private placement raising US$100M.

Keep it simple

Shipping companies that list on a stock exchange need to have an easy-to-understand story to encourage investors who, on the whole, find the industry confusingly opaque. Torm’s strategy is simple; employ the fleet primarily in the spot market and optimise earnings from voyage to voyage. Longer-term time charter-out contracts are only considered if a customer needs to enter such an arrangement and if the expected returns are attractive.

In line with this keep-it-simple approach, Torm performs all its own commercial and shipmanagement services in-house and since 2011, none of its tankers have been committed to pools. Chief executive Jacob Meldgaard states that this policy is justified: “Over the past several quarters, Torm’s commercial performance has consistently been among the best in its peer group, both in terms of total time charter-equivalent earning per day and in terms of return on invested capital.”

The third largest tanker company in the region is Hafnia Tankers ApS, with 35 tankers, consisting of 18 MRs, 13 MR1s, and 4 LR1s. However, Hafnia Tankers has a far greater influence than the numbers suggest, due to its involvement in pools.

Hafnia Tankers chief executive Mikael Skov described why the company had an emphasis on pools: “The pools are a great way of obtaining scale and market intelligence through consolidation; the alternative would be to invest in order to obtain scale which will be difficult and often lead to bad investment decisions.

“In a world of increasing availability of data and analysis, increased scale via pools will give you the ability to optimise on global presence in all sizes of the product tanker sector, as well as provide an optimal solution for our customers,” he said.

Maersk is currently the second largest pool operator of local tonnage, but is easily the largest globally. The pool fleet is estimated to be around 100 vessels across five sectors. The Maersk pools have expanded considerably in the last 12 months, following a concerted effort to win owners in Asia. The attraction to Asian product tanker owners is access to markets in Europe, where Maersk already has a strong client base.

Going digital

Maersk Tankers is also developing a digital platform. In August last year, it announced it had entered an equity agreement with CargoMetrics Technologies LLC (CargoMetrics), a Boston-based hedge fund specialising in quantitative trading models derived from shipping data. The agreement establishes a strategic partnership between Maersk Tankers and CargoMetrics, providing Maersk Tankers access and exclusive rights to CargoMetrics' analytical models, algorithms and capabilities.

CargoMetrics links satellite signals, historical shipping data and proprietary analytics for trading purposes in its systematic investment platform. Earlier this year, Maersk Tankers became one of the first tanker companies to appoint a chief information officer (CIO), in the form of Torben Ruberg, who previously held that position at Falck A/S. Mr Ruberg also acted as an external expert and advisor for the Danish State in the development of its IT strategy, governance and management.

Third-placed local fleet pool operator, Stena Bulk of Sweden, is another IT-oriented pool operator. Since the beginning of 2017, members of the Stena Bulk pools have been able to access details on pool earnings and operations via the Stena Orbit portal. An update of the app will give members time charter earnings for up to two weeks ahead and track competitor vessels, as well as providing port agent-type data, such as terminal information and US Coast Guard updates.

The increasing level of digitalisation is said by some pool operators to be worth up to US$3,000/day in efficiency gains, but the main driver of the performance of pool earnings is still the market. So far, 2018 has seen weak earnings for most pools. Stena Bulk reported a sharp correction in earnings, from an average of around US$24,000/day in the first quarter of 2017 to close to USD$13,000/day in the first quarter of 2018. It is reported that Hafnia and the other pool managers have also revised downwards their earnings estimates for 2018.

Market outlook

The bulk of the Danish and Swedish tanker fleet rests in the product tanker sectors, mainly MR2s and the small clean tanker sectors. The long-term outlook for these sectors is looking better, as the MR sector is likely to benefit most from the requirement to ship middle distillates long haul from the refineries in India and the Far East. There is some irony in the fact that increasing demand to burn middle distillates as an alternative to fuel oil to meet environmental regulations may actually increase the tonne per miles for this sector.

The short-term outlook is clouded by poor earnings performance in the crude oil tanker sector, causing some elements of that fleet to swing into the product tanker trades.

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