Scorpio Tankers: Product Tanker Market Rebound Will Last Years

Scorpio group has converted orders for bulkers to orders for tankers

The product tanker market is set for a rebound that could last several years, according to Scorpio Tankers, Inc. (Scorpio Tankers) CEO Robert Bugbee, ShippingWatch reports.

As well as lower bunker costs on the back of an oil price drop, Scorpio Tankers points to strong demand for the sector.

"We have high expectations for 2015, 2016 and beyond," said Bugbee.

"Up to now the product market has been largely about a secular change in refining, now with the lower oil price we expect demand for product to accelerate too."

"Therefore we think the product market will not just be stronger but it will be so for longer."

Although low bunker prices will help Scorpio Tankers, the report suggests they will also aid its rivals and reduce the positive impact the company had hoped to gain through having a younger, more efficient fleet.

But Bugbee argued that the advent of tighter environmental legislation still means his company has a competitive edge with its younger fleet.

Bugbee pointed, in particular, to the building of new refineries in India and the Middle East which will mean longer voyages to take refined product where it is needed.

In addition, he said that demand is rising in Asia, and is strong in South American countries like Argentina and Brazil where local refining capabilities are not sufficient to supply the market.

The Scorpio group has been rapidly growing its fleet over recent years seeking to significantly enter the product tanker market with Scorpio Tankers and the dry bulk market with sister company Scorpio Bulkers, Inc. (Scorpio Bulkers).

At first, both companies were planned to grow at the same rate in terms of vessels but the strategy has changed recently to focus on Scorpio Tankers, which Bugbee has described as the "beauty" of the group.

The group has converted orders for newbuild Capesize bulkers to tankers, for example, as Scorpio Bulkers is expected to have a tough year in 2015.

Earlier this year, Scorpio Tankers' shares were downgraded to "reduce" by analysts for Norwegian shipping company Fearnleys following disappointing results in the second half of 2014.