OSLO

Along with several other shipping companies, the tanker carrier DHT Holdings has its base in the Thiis courtyard. A building in the middle of Oslo's financial center just a small walk from the prominent Aker Brygge neighborhood and owned by the Norwegian Arne Blystad who has his own office here.

When Trygve P. Munthe and Svein Moxnes Harfjeld first got to know the Thiis courtyard, it was not as the CEOs of DHT Holdings where they currently share the top position.

Years before, they had met each other through mutual acquaintances and when the financial crisis really hit the global economy, they both agreed that it was time to try something new. Something for themselves. With two computer screens and one telephone, the set up an office in the Thiis courtyard. They looked into everything. Dry bulk, container and tanker. Trygve P. Munth came from the top position at Western Bulk and prior to that, he had headed the tanker carrier Skaugen PetroTrans in Houston for 11 years. Svein Moxnes Harfjeld had also spent several years abroad including as CEO of Indonesian Andhika Lines and BW Offshore, so there seemed to be understanding of the various segments.

From the office, the two gentlemen tried hard to establish a carrier of their own, backed by private owners. At one point in time, acquisitions in existing carriers was also a focus, and one day they stumbled upon a small tanker carrier with a little over seven ships on the water, listed on the NYSE , and which looked more or less passive.

Today, DHT Holdings is far from passive. In 2010, Trygve P. Munthe and Svein Moxnes Harfjled entered the CEO position together at the carrier and since then, they have made themselves noticed in the industry by investing about gross USD 1.3 billion in 16 super tankers, VLCCs, in just nine months. Six newbuildings, where one will be delivered this year and the last five next year.

Market on fire

Currently nothing could be better, Trygve P. Munthe tells ShippingWatch in the office on the seventh story. In the first quarter of the year, the carrier with 18 vessels on the water achieved a net profit of USD 23.2 million, and the spot rates for the large VLCCs are on fire. This highlights that the strategy has been the right one, he says:

"In 2013 we entered the market with a clear ambition that it was now time to invest in large tanker. The values were at their lowest and we looked at three to five years of exciting development because the order book was at its lowest in many years," he says and points to the fact that in the years 2014-2016, there does not seem to be a significant fleet growth.

"And then we thought that the demand would continue to grow. It was a little difficult convincing everyone because consensus was that the shale gas revolution in the US would mean that trade with oil would decline and the transport as well. Our argument was that, yes, the US would reduce the import but others would take over in the Far East. What everyone is now in agreement on, we argued for early on - that there would be changes in the trade patterns but that this would be positive for the demand, the exploitation of the tanker fleet, higher freight rates, higher period markets and higher values."

Photo: DHT

The development in the first quarter has continued into the second and as it seems right now, the summer market looks like it will be the best in many years, according to Trygve P, Munthe. As a listed carrier, DHT Holdings does not make statements about the expectations for the entire year. In the first quarter, about half of the carrier's VLCCs were in the spot market at USD 60,000 per day. In the second quarter, the spot market has been marginally lower.

"But there are still good and strong rates, so we expect a good result for the second quarter. We will start to let things far into the third quarter and the rates will maintain themselves. The impressive part of this boom is that there have been no signs of weakness in the spring," says Trygve P. Munthe.

It will stop

Although the market for crude oil is piping hot at the moment and will presumably continue to be so for a good while, the pace will most likely slow down at some point. And like in many other segments, it will be the supply side that will ultimately put an end to the growth.

"We believe that it could last for a good while longer, but we are aware that it will end some day and it will be mainly the supply side that will end this inclination period," he says.

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This is the development that was noted in product tanker for instance, where high rates caused a lot of people to invest in new vessels in order to get in on the boom. The upcoming years will see a steady flow of newbuildings entering the market and this will be a big challenge for the shipowners in the segment. The same thing will supposedly happen to the large gas vessels, VLGCs, which are currently sailing at top rates but where a large order book is waiting and in the long term will put an end to the high earnings.

The order book for the large tankers is about 14 percent of those which are currently sailing, and according to Trygve P. Munthe, it is difficult to tell which private players have big enough financial muscles to finance new ships today - while on the listed market there is no appetite for further contracting.

"Consolidation and acquisition of other companies and second hand vessels is possible, I think. But generating a lot of money on the stock exchanges in New York or Oslo to contract, that is over now."

And yet he is not in doubt:

"I am convinced that it will happen again. I do not think that it will happen in the next few years. But that it will happen, I do think so."

DHT Holdings stays in the black in Q1

No plan for new vessels

DHT has no plans of its own to increase the fleet with new ships anytime in the near future. To have success with super tankers, you must act differently in different parts of the cycle, he says.

"At the bottom of the market it has been our ambition to invest and increase the fleet and we have lived up to that. Now we are in a general phase of improvement, where the market is developing positively. We can go from having the most spot exposure to taking time charter vessels as well. In itself, growth is not necessary. We have a big enough fleet to justify our existence and a big enough fleet to get more attention from the oil companies," says Trygve P. Munthe and continues:

"If we need some ships, it will be second hand. We do not need to contract new ships in the foreseeable future. It is important that as big players, we do not race each other to build more ships, because that is a surefire way to destroy the market."

DHT Holdings currently has 14 VLCCs, two Suezmax vessels and two Aframax ships in the fleet.

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