The tanker owner panel, moderated by Evan Uhlick, who heads up Ocean Industries for DNB’s New York office, zeroed in on the question of whether the current party would continue.
Robert Bugbee, President of Scorpio Tankers (NYSE: STNG) said it simply “The conversation right now is only about one thing- how high are the rates going to go?”, along with a corollary question of “What are you going to do with the cash?”
In answering the question of whether “the party had started”, Bugbee said that it had not. Using the analogy, he suggested that maybe the hosts were setting up the cocktail area, but said that “most of the people were already in a pub, waiting to go to the party later.”
The pub was serving its standard fare of insider-knowledge, with Bugbee intimating that the “real” market, not visible to outsiders, was exceeding reports. This bears out the views of consultants Vortexa, which had presented just prior to the tanker panel, and others that dislocations were playing a role in the market strength.
The Scorpio Tankers CEO said: “We’ve done strange fixtures….we’ve just done North Asia to Los Angeles at $98,000 per day….Japan-Korea to Anchorage is $80,000 per day.” He noted that such routings are outside of the normal indices being reported, “But they give you some indication of what’s being done in the markets.”
A new face on the product tanker scene was given an official welcome by Bugbee. Bart Kelleher, recently appointed CFO at Ardmore Tankers (NYSE: “ASC”), invoking economic analysis that had been presented by Vortexa, suggested that “The market likes chaos and dislocations- which create additional arbitrages. We know that we are in a cyclical business.”
He cautioned that, “At some point, the levels of the party may wane some,”, mentioning that “maybe the $60,000 per day being fixed is not the $100,000 per day that was fixed [several months previous]”, but was quick to add that the current underlying strength, which he characterized as very solid/very supportive, “keeps us excited”.
Marine Money events, better than other comparable venues, really capture the ever-shifting interplay (ranging from dynamic and ephemeral all the way to long-lasting) between the shipping and investment worlds. On the subject of investors, Bugbee said, “The investors are getting too caught up into exact numbers…and working out exactly what’s going to happen with Russia, and with tonne miles…it just doesn’t matter.”
In what moderator Evan Uhlick described as an “early setup”, Bugbee described high utilization, above 90%, and inelastic supply as fuel for further partying. Later on, he suggested that investors had lately been uninterested in matters related to Environment, Social, Governance (ESG), saying “right now- they only care about how high will it go, and what are you doing with the cash.”
Panel member Bob Burke, the Founder and CEO of Ridgebury Tankers, which invests alongside various private equity clients in second hand crude and product carrying vessels, offered a different set of views. Burke, who pointed out the extreme strength has been driven by unpredictable abnormalities.
“Who expected Covid? Who expected a war in the Ukraine?” he asked, rhetorically. He confessed to being “comfortable when the market is really bad…and uncomfortable when it’s way up here…we bought a lot of ships at the bottom, and we’ve sold a lot of those…but- I am OK being uncomfortable for a while- all the indications are that its’ going to be a really good party.” He added that vessel sales in strong markets offer opportunities to return large swatch of cash to investors.
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