Formosa Plastics Marine Corp (FPMC) is considering selling all of its LR1 product tankers over concerns about the fuel economics of vessels without scrubbers post-2020.
Industry sources said as an initial step the Taiwanese owner is in the process of selling two ships — the Universal Shipbuilding-constructed, 70,500-dwt FPMC P Alpine (built 2004) and Formosa Falcon (built 2005) — for nearly $16.4m enbloc.
Three companies interested
TradeWinds understands three companies in China, the US and South East Asia were in the final round of bidding, but it is not clear which buyer was successful.
“The deal is being signed off and we are looking at a delivery date of November,” a Taiwanese source said.
“FPMC feels it doesn’t make much sense investing [in] scrubbers on them due to their ages, so it put them in the market after their recent period charters expired.”
“The other FPMC LR1 vessels have charter commitments … when they are off charters the company may also sell them if the prices are right.”
FPMC also has four 75,000-dwt, 2009-built vessels in its LR1 fleet, constructed at STX Offshore & Shipbuilding.
VesselsValue estimates the FPMC P Alpine is worth $7.89m and the Formosa Falcon is worth $8.27m. The younger vessels are valued at $17m to $18m each.
While weak spot earnings continue to plague product tankers' values, many market players predict an upturn, as the pace of newbuilding deliveries is slowing and stock drawdowns of refined products are nearing the end.
According to Bloomberg's survey of the median forecast of analysts, spot earnings for LR2s will rise from $13,005 per day in 2018 to $18,688 next year, before increasing to $27,250 in 2020.
Daily returns of LR1s will increase from $12,450 this year to $17,000 in 2019, and $22,250 in 2020. MR earnings will rise to $15,000 per day in 2019 and $19,750 in 2020, compared with $12,236 this year.
Scrubber drive
FPMC, part of Formosa Plastics Group (FPG), has been rapidly expanding its fleet, partly due to large in-house requirements.
Formosa Petrochemical Corp, a listed subsidiary of FPG, owns an oil-refining and petrochemical complex, which imports crude, naphtha and LPG for feedstock uses while exporting refined and chemical products. Mai-Liao Power Corp, part of FPG, imports coal to generate electricity.
According to Clarksons, FPMC has a diversified fleet with 62 vessels of 7.2 million dwt on the water, including nine VLCCs and 14 capesize bulkers, and six ships totalling 312,000 dwt on order.
FPMC is expected to assess a proposal on scrubber installations in the coming weeks. Vessels will need to run on 0.5% sulphur fuel or LNG from 2020, or be installed with scrubbers to continue consumption of 3.5% sulphur fuel, according to the IMO.
“I think the large-sized ships remaining on the FPMC fleet will eventually have scrubbers,” the Taiwanese source said.
“The company doesn’t really want the LR1 vessels, because for them the post-2020 economics doesn’t work and there is limited in-house use.”
