d’Amico International Shipping’s move into the LR1 product tanker sector is paying off, says chief executive Carlos Balestra di Mottola.
The larger product tankers were the primary reason that the Milan-listed company benefited from booming spot rates in the second quarter.
DIS has been increasing its exposure to the LR1 sector in the belief it would benefit from longer sailing distances caused by the crisis in the Middle East, Mottola said.
“We expected …the larger vessels were going to be the main beneficiaries,” he added.
“So we refrained intentionally from fixing our LR1s on period contacts and we kept a larger percentage of our LR1 fleet than usual on the spot market.”
That was the reason for the company logging its best quarter for average spot rates, which hit $44,949 per day and helped it to the second-best quarter in its history.
Purchase options
DIS operates six LR1 tankers but has been increasing its exposure in the sector.
Earlier this year, it ordered four 75,000-dwt product tankers for $232.2m at China’s Jiangsu New Yangzi Shipbuilding, scheduled for delivery in July and December 2027.
The company is also set to grow its owned LR1 fleet through purchase options.
DIS has the 75,000-dwt Cielo di Houston (built 2019) on bareboat charter with a purchase option that it expects to exercise over the next year.
It also intends to exercise purchase options on five smaller MR tankers in the fleet.
DIS has been more cautious in that segment and has been happier to lock into longer charters for its MRs and handysizes.
“We took coverage on the smaller vessels where we saw less upside on the handysize vessels, and that turned out to be the right decision,” Mottola says.
DIS plans to lower its breakeven costs by gradually exercising the remaining purchase options on leased vessels.
Mottola is positive on the outlook for the tanker market, saying the prospects are good “for the next 12 months at least” and pointing to the ageing fleet and the potential for asset values to rise.
