The tanker market has much to gain from consolidation, but the instinct of owners is to hold on to their own ships, Frontline chief executive Lars Barstad told a London conference.
Asked by Capital Link moderator Edward Royle, chief commercial officer of Ifchor Galbraiths, about mergers and acquisitions in the sector, the Norwegian company’s boss joked it was funny how consolidation questions always ended up in his lap.
The John Fredriksen-backed VLCC and suezmax player pulled out of a merger with rival Euronav this year after opposition from the other major Euronav shareholder, the Saverys family.
“There is actually a lot of consolidation going on”, Barstad told the seminar.
He argued it might not always be feasible for smaller shipowners to invest in future fuels and emissions-reducing technologies themselves.
“And then they will go to pools,” Barstad said. “So a pool is like the consolidating party away from merger and acquisitions.
“When it comes to building large units and economies of scale, it’s not necessary to merge the two biggest guys on the street. It’s more the smaller marginal owners.”
But he added: “We are in the shipping industry and we cannot forget that. The shipping industry is dominated by shipowners, and shipowners like to own ships. The population of non-listed, smaller shipowners is far larger than the listed ones.
“So it’s just in the natural DNA of shipping that the consolidation is very difficult to achieve. So we end up having 70 counterparties within a couple of weeks in the market.
“Whether we can do something about it, I don’t know. But as long as everybody can work out of the same knowledge base, I think that’s probably one of the larger benefits of consolidation.”
Barstad said tankers historically have been inefficient.
He told the conference that information is not shared at all, particularly between cargo owners and shipowners.
“That’s still the case, but there’s a lot of tools out there in order to make a more qualified decision,” Barstad said. “And we tend to see that the larger outfits are able to make more qualified decisions rather than the smaller ones.”
