Tanker owner Euronav is breaking into scrubber-fitted VLCC tonnage with the purchase of three resales from Sinokor Merchant Marine priced at $93.5m each.
Former scrubber-sceptic Euronav said it is paying a total of $280.5m for the VLCCs, which are under construction at DSME in South Korea.
The vessels, which are eco-type ships fitted with ballast water treatment systems, are due to be delivered early in the fourth quarter of 2020 and in January and February 2021.
The company said the ships’ delivery dates will give the vessels “exposure to the key winter freight markets in 2020/2021”.
Market players identify the ships as three of four vessels that South Korean owner Sinokor is building at the yard.
Euronav said the ships will be financed through existing borrowing facilities, with the largest portion of the payments for each vessel to be made on their deliveries.
The company described its three-resale buy as being “consistent” with its core goals in that the ships are ex-yard resales and will not add to existing supply. They will also help rejuvenate its VLCC fleet, which currently has an average age of just over seven years.
Disruptions and opportunities
Euronav chief executive Hugo De Stoop said: “The large tanker fundamentals remain constructive despite substantial headwinds surrounding economic activity linked to the coronavirus that we believe and hope will be temporary.
“Current disruptions to the freight market have provided an opening for Euronav to be opportunistic and deliver what we believe will be long-term value for our stakeholders.
"This transaction demonstrates our flexibility and our capacity to seize opportunities thanks to a strong balance sheet and a robust liquidity position.”
In the weeks before the outbreak of the coronavirus, Euronav had been signalling it might move on scrubber-fitted tonnage, flagging up its large dry-docking programme for 12 ships this year and talking about the possibility of retrofits.
At the same time, a large number of scrubber-fitted VLCCs emerged for sale, at strong prices in what was then a buoyant and upbeat market for large tankers.
But the spread of the virus has limited retrofitting work at yards and collapsed trading markets.
Speaking to TradeWinds, Euronav head of investor relations Brian Gallagher said the company had moved quickly in the wake of the coronavirus spread to make its three-ship purchase, describing it as being a matter of days rather than weeks.
He said Euronav had opted for some of the later-delivering vessels because it has been “very disciplined” on price. “People have known when to come to us when the price metrics have gone into a certain band,” he explained.
Gallagher appeared keen to balance any focus on the VLCCs being scrubber-fitted — which is something of a U-turn for the tanker giant.
“Clearly we are buying a technology which historically we have been sceptical [about],” he said. “That’s all we have been. We have not been dogmatic.”
“This is business as usual. It is a very good price, we believe. It’s opportunistic.
More to come?
“Clearly there are some short-term issues in the marketplace, which are very serious, but we do believe they will clear and the market will revert back to the strong fundamentals, which we believe will be very supportive of this transaction,” he added.
Asked if the company is there to buy more, Gallagher said: “Potentially, yes,” mentioning both VLCCs and suezmaxes.
Gallagher said Euronav will continue to look at retrofitting scrubbers as an option for its tankers. “We continue to assess all opportunities as they present themselves,” he said.
But he acknowledged that the retrofit picture had become less clear in the past three weeks with the spread of coronavirus.
