Today's product tanker market is so divided that it can only be good news when carriers decide to merge.
As when Scorpio Tankers and Navig8 this spring joined forces, with Robert Bugbee's Scorpio taking over Navig8's vessels in a move that pushed the new entity to a crucial market value of USD 1.1 billion, a figure that is likely to make the project more interesting to investors, says Jan Rindbo, CEO of carrier Norden, which has a business unit operating in the product tanker sector, where expectations for a merger wave have gathered speed in the last six months.
Structurally for the tanker market, it will be positive that this fragmented sector becomes more consolidated
"It makes sense that there are more and bigger players emerging. Structurally for the tanker market, it will be positive that this fragmented sector becomes more consolidated," he says in an interview with ShippingWatch in relation to the publication of Norden's third quarter interim report.
Pool ventures provide critical mass
Norden's vessels are currently being operated in the Norient Product Pool, and the experiences from this pool make Rindbo optimistic about the prospects of increased consolidation. The pool venture has shown him the benefits of being part of something bigger.
But though consolidation would be good for the sector, the CEO does not necessarily see Norden participating in this movement.
I'm not convinced that a consolidation will necessarily result in higher earnings, as we already have a critical mass.
"We feel that we have a critical mass. We're currently operating a little less than 100 product tanker vessels in Norient Product Pool, and we have the critical mass needed for our customers. This doesn't mean that there's no room to grow, I think there is. But I'm not convinced that a consolidation will necessarily result in higher earnings, as we already have a critical mass. There will probably be synergy effects, but I'm not sure they'll be decisive," says Rindbo.
The CEO notes that much of the talk about consolidation is driven by owners looking to exit product tanker. This is far from Norden's stance, as the carrier is more interested in growing its tanker business.
This summer Norden acquired two MR vessels, and chartered ships on long-term contracts, while the carrier has also grown its fleet of chartered vessels on short-term contracts. With a low market, this is the right time to boost capacity, says Rindbo.
"But this doesn't mean that we won't take part at all. If there are opportunities that make sense, we'll look into it. But for now, I think we have a strong growth strategy in place for our tanker business, and it needs to be done organically."
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In October, Norient Product Pool lost 18 vessels from US-based Diamond S, which ahead of January 2018 will pull its vessels back into its own fold, just as the carrier has withdrawn its vessels from Scorpio Tankers' pool. The gap left by Diamond S actually creates an opening in the pool, and if something similar comes along, Norden will look into it, explains Rindbo.
"In the meantime, what's happened is that we at Norden have expanded our tanker fleet, and that actually makes up for the ships we'll lose from Norient when Diamond S withdraws. So Norient is no worse off than before," he says:
"We have an open mind in terms of new pool members. We don't have a growth plan, but if the right strategic partner can contribute a solid, homogeneous fleet that fits with the one we're operating today, we'll look into it. But it's not like we're interested in bringing many different individual members into the pool."
English Edit: Daniel Logan Berg-Munch