Elite Tankships, a recently formed joint venture between Singapore’s Essential Capital and tanker industry veteran Mangish Kakodkar, is eyeing a move into storage tankers as demand booms due to the contango effect.
“We are in talks with some parties right now,” Kakodkar told TradeWinds this week, while at the same time conceding that finding suitable tonnage for contracts — either via charters or outright purchases — presents a problem.
“You need a large vessel for contango to make sense. Over the last few weeks, we have seen strong demand for storage vessels, and this has created a shortage of VLCCs,” he explained.
Older candidates
Kakodkar noted that older VLCCs are the candidates in the current market, where trading VLCCs were earning in the region of $195,000 per day in the spot market on Tuesday.
“You don’t make that kind of money with a storage tanker. Storage rates are from $60,000 to $65,000 per day for a six-month contract, and perhaps $110,000 if the vessel is still able to trade.”
The figures that Kakodkar quoted were applicable to the beginning of this week, and he noted that the storage market was unpredictable and subject to rapid fluctuations.
“All it took was a tweet from Donald Trump saying that he expected Saudi Arabia and Russia to cut production by 10m barrels per day and demand for contango went down.
"If Saudi Arabia announces in this week’s Opec meeting that it will cut production, people who wanted to store oil might change their mind,” Kakodkar said.
Despite the storage market’s unique challenges, Kakodkar argued that Elite Tankships was well placed, as the partnership has extensive experience in the sector.
Experienced alliance
Essential Capital, owned by oil trading veteran Hon Kim Weng, has owned and operated up to five VLCCs as storage vessels since it was founded in 2012, and has strong expertise in cargo quality and quantity management, especially in the area of cargo blending operations.
“They don’t own any right now but the organisational expertise remains and the time is right to get back into the business,” Kakodkar said.
All vessels are operating under the Elite Tankships umbrella, which is the brand we are focusing on building. Our aim is to be in the business of commercial management and vessel chartering
Mangish Kakodkar
While Elite Tankships eyes the storage business, the company is also keen to expand on the conventional tanker operating side as well.
When it was first set up in January, Essential contributed an MR product tanker it owns directly.
Kakodkar, through MK Shipping & Trading, a company he formed after leaving AG Shipping & Energy in 2019, contributed two chartered LR2 product tankers.
The three vessels are out on charter to large European commodities trading houses and publicly-listed shipowners, whose identities Kakodkar prefers not to make public due to strict confidentiality clauses.
“All vessels are operating under the Elite Tankships umbrella, which is the brand we are focusing on building. Our aim is to be in the business of commercial management and vessel chartering,” he said.
Kakodkar hints that several deals are in the making but have been delayed due to the coronavirus pandemic.
Kakodkar previously held senior management positions at MOL, AP Moller-Maersk and Koch Industries before teaming up with Oaktree Capital Management to launch AG Shipping in Singapore in late 2017.
