Tanker Owners Look to New Ships, Not More Ships

"We are renewing our fleet regularly to ensure sustainable operations," said Hor

AET Tanker Holdings (AET)'s CEO Wednesday said on the sidelines of Singapore's Sea Asia conference that tanker owners are looking to replace ships, not grow their fleets, in the current environment, Platts reports.

According to Platts, tanker earnings on the key very large crude carrier (VLCC) Persian Gulf to Japan route are currently at a 12-week high.

Daily earnings for VLCCs on that route are around $62,000, up from only $12,000 a year ago.

But even these gains have not quite brought the market to a place where it is conducive to investment in fleet growth, said Hor Weng Yew, AET's President and CEO.

"Earnings have improved but from the investment perspective in the long term they are still not good enough," he said.

But the company is still investing in fleet regeneration, phasing out older ships in favour of new ones.

"We are renewing our fleet regularly to ensure sustainable operations and maritime safety and the industry as a whole also needs to do the same," said Hor, suggesting AET plan to buy four Aframaxes.

AET is a subsidiary of Malaysian shipowner MISC Bhd (MISC), which owns and operates a fleet of around 80 tankers, including 13 VLCCs, 48 Aframaxes, and four Suezmaxes and is itself understood to be a subsidiary of Malaysian energy conglomerate, Petronas.

"We are cautiously optimistic about the tankers outlook for the next two to three years," said Hor, adding that it is difficult to predict whether current earnings levels are sustainable.

He said ship supply in the tanker market is under control, although conceded demand for newbuilds is rising.

According to Platts, the global tanker fleet has grown 20 percent in the past five years, during which time oil demand has grown only 9 percent.

In February, Scorpio Tankers CEO Robert Bugbee said a rebound in the tanker market will last years, adding "we have high expectations for 2015, 2016 and beyond."