SK Shipping’s eye-catching move for two VLCCs from Arne Fredly’s Hunter Group is backed by potential time charter employment from two major players in deals that help explain the premium pricing for the newbuilding tankers.
Oslo-listed Hunter has sold one tanker at $98m and is in talks to offload a second to the same owner at what represents the highest figure secured for a VLCC newbuilding resale in five-years.
When Hunter announced the potential sale in May the values immediately caught the market attention.
The price has attracted further scrutiny after John Fredriksen’s Frontline revealed it had bought a VLCC resale for just $92.5m.
While multiple theories for the price gap between the two deals have been circulated, long subjects on the Hunter ships relating to time charter employment appear to be a major contributor, brokers explained.
Tanker market sources say SK Shipping has now locked the first of the Hunter ships into a potential five-year charter with Trafigura.
They suggest the contract runs for three firm years, with options for two more, at a rate of $38,000 per day.
Despite the VLCC market potentially heading into an up-cycle around IMO 2020, it is not thought the contract includes a profit share element.
SK Shipping and Hunter remain in talks for a second VLCC resale deal, with that vessel being targeted for a long-term charter with Koch. Likely terms have yet to emerge.
While the figures reported for the Trafigura time charter would be profitable for SK Shipping, brokers noted the business would not yield a monster profit.
Both of the scrubber-fitted tankers are under construction at DSME for delivery in late 2019 and early 2020, which is seen as the prime window for IMO 2020.
An executive at SK Shipping declined to comment on the matter when contacted by TradeWinds this week.
Frontline pricing
At the same time as Hunter and SK Shipping are working on their deals, Frontline announced it had snapped up a VLCC resale being built at Hyundai Heavy Industries for delivery in the middle of 2020.
It is paying $92.5m for the 300,000-dwt tanker, identified by brokers as hull 8022, which is believed to have been contacted by Hyundai Glovis but others link to a mystery South Korean fund.
While the subjects on the Hunter deal helped push up the pricing, brokers pointed to the Frontline deal signed earlier this year — before the latest jump in asset values aided by strengthening sentiment around IMO 2020 backed by firm demands from charterers.
Others pointed to Fredriksen’s eye for a deal and the later delivery of the Frontline tanker, which means the ship will not in the water when the first throws of the new sulphur laws are expected to drive up rates.
The Hunter VLCCs are Fredly’s first known shipowning investment, and the company is expected to pocket around $30m having contracted the ships at $82m to $83m each.
Established VLCC force
SK Shipping is a major player in the VLCC market with 18 of the vessels on the water.
The stable includes the 313,900-dwt C Prosperity (built 2009), which is believed to be the most expensive VLCC resale in history.
The South Korean owner bought the ship in February 2008, just seven months before the global financial crisis hit.
South Korea’s private equity group Hahn & Co took control stake of SK Shipping last October through a debt and equity deal.
The transaction valued at $3.7bn, allowed Hahn to become the company’s major stakeholder, holding 71% shares with SK Holdings retaining 21%.
VesselsValue lists SK Shipping with a fleet of 59 ships — 30 tankers, 13 bulk carriers and 16 gas carriers. The gas fleet includes nine LNG carriers and seven LPG ships.
SK Shipping is also due to take delivery of two very large ore carrier newbuildings and one medium-range tanker.
The pair of 325,000-dwt VLOCs are under construction at Dalian Shipbuilding Industry Co (DSIC) and are slated for 2021 delivery.
The company has ordered the VLOCs against long-term contract-of-affreightments (COAs) from Vale. As for the 50,000-dwt, the product tanker is under construction at Hyundai Mipo Dockyard and is slated to roll out of the drydock in autumn.
Trond Lillestolen and Eric Martin contributed to this story.
