The global market for crude oil tankers remains too fragmented and needs consolidation among owners, one of the industry’s leading companies said on Wednesday.
Oslo-listed Frontline, the oil shipping arm of billionaire investor John Fredriksen, also said the market for crude carriers is expected to remain weak until the second half of 2018.
“The tanker market is highly fragmented with many owners who have one or two vessels,” Frontline Chief Executive Robert Hvide Macleod told analysts in a conference call.
“It would be good to see the fleet sitting in fewer hands,” the CEO said, adding that limited financing options for small shipowners, as well as more stringent environmental regulations, could be catalysts for consolidation.
In June, Frontline dropped its months-long pursuit of U.S.-listed DHT Holdings, which rejected a $500 million all-share bid as woefully inadequate.
Frontline on Wednesday posted a $24.1 million third-quarter loss as tanker rates hit four-year lows, and though the spot market has since recovered, it is still fragile by historical standards.
While demand for ocean transport of oil is rising as winter approaches in the northern hemisphere, the outlook remains bleak for the early months of 2018 as more new vessels are expected to emerge from yards, Frontline said.
More than 20 percent of the global fleet of very large crude carriers (VLCCs) could be sent to scrap yards in coming years however, as their age and inefficient fuel consumption make them obsolete, the company added.
“We expect vessel scrapping to accelerate through 2018,” Hvide Macleod said. “It is the scrapping that will determine the longer term outlook for tankers.”
The rise in oil prices, which have more than doubled since early 2016, was also seen as positive for shippers.
“It’s a real sign that demand for oil is strong, we can have confidence in demand growing,” the CEO said.
“We’ll be very well positioned when the market recovers.”
Frontline shares closed 1.5 percent lower for the day at 46.8 Norwegian crowns after initially falling to 43.3 crowns in early trade.