Diamond S Shipping's MR product tankers will join Norden's Norient Product Pool this week and have arrived at just the right time, according to the pool's boss.
Soren Huscher, who heads up Norden's tanker operator division and is chief executive of the Norient Product Pool (NPP), said the combination announced last week will give the pool greater flexibility to take on short positions and optimise its fleet operations.
The pool's increased scale — with a fleet of around 150 vessels, including the 28 MRs from Diamond S — will also help it lower its cost base and better enable it to achieve efficiencies.
Norden was one of four companies that Diamond S approached with the proposal to pool product tankers and discussions were initiated about six months ago, Huscher told TradeWinds.
But the strategic agreement, named DiaNor, is not the first time the pair have worked together.
The Danish company managed eight tankers for Diamond S from 2015, which increased to 18 vessels over the following two-and-a-half years.
But the relationship came to an end when US-based Diamond S merged with Capital Product Partners in 2018 and took commercial management of its vessels in-house.
However, Diamond S seems to have had a change of heart, influenced by the disappointing earnings its fleet has been able to achieve, as TradeWinds has reported.
The Diamond S MR tankers were able to achieve average earnings of $16,500 per day during the first quarter, compared to $19,700 per day for Norden.
Benefits to Norden
The addition of the Diamond S vessels will give NPP flexibility like never before at a point in time where more is needed, Huscher said.
"We have about 17 or 18 ships out on time charter and we think that is pushing it really because if we wanted to do more of that and take some cover in the market, we think we would actually lose flexibility," he told TradeWinds.
He said the pool will also be able to take on more contract cover now, such as contracts of affreightment.
"We have a few today, but we can now do more and make sure that we have a solid cargo base to manage our ships around," Huscher explained.
Creating scale has clear advantages. But when asked if the pool will look to bring in further partners, Huscher said: "Not necessarily."
"We've never really been looking to create a business out of running a pool," he added. "Our main focus has always been to create maximum earnings for the individual ship.
"Having a lot of different pool participants, we feared, could cloud our vision and our ability to make quick and good decisions."
He said the company is not aiming to add one or two ships at a time from an owner.
"So this is perfect for us — finding somebody who can join with a big chunk of ships in one go and can help us create the mass that we want," Huscher explained.
Norden's direction as a tanker operator is relatively new for the company, which aims to become more "trading oriented".
The firm has owned 100% of NPP since the beginning of 2019, having bought out its partner Interorient's half of the company.
This strategy continued this year when Norden's owned fleet was split off into its new asset management division and its chartered-in vessels were reorganised into its tanker operator unit. Effectively, NPP is Norden's spot chartering arm for tankers.
Future steps
It's possible that the tie-up with Diamond S could go beyond just commercial management of its fleet, according to Huscher.
"We are constantly in need of new ships and fleet renewal and so is Diamond S," he said. "The ships that we are taking over now are built between 2007 and 2010.
"So they are also in a situation where they will have to do some fleet renewals and, who knows, maybe that can be done together. Maybe we can do time charters together, etc. But this is basically a letter of intent that we will look to each other for competencies, for good advice, and we will do some knowledge sharing that may benefit both parties."
It is hoped that the combination with Diamond S will also enable NPP to further improve its use of technology.
Norden's advanced analytics department oversees the operation of the NPP fleet, using data to monitor, analyse and then optimise its vessels' fuel consumption, routing and other factors such as when to clean hulls and propellers.
"We have a lot of things going on, but we still can go much further and I think, with the combined forces, we are able to invest in new systems that will help us along," Huscher said.
