A chance meeting on a plane flight sowed the seeds for two Singapore owners to pool their stainless-steel chemical tanker fleets this month.

The goal was to form a single platform that Golden Stena Baycrest Tankers (GSB Tankers) and IMC Shipping’s Aurora Tankers expect will fuel future fleet growth in the niche segment.

GSB chairman Bjorn Stignor and IMC Shipping managing director Frederik Guttormsen were competitors when fate assigned them their seats on a flight from Houston, Texas, to Singapore.

And, as one does on a long flight, the executives started talking.

“It was a nice way to get to know each other,” Guttormsen told TradeWinds.

Stignor said the pooling idea was hatched there and then.

“Both our companies work in the same sectors, and we discovered they have a lot of the same values and the same curiosity of new ideas,” he said.

Although both were players in the stainless-steel chemical tanker market, neither had a significant presence.

Leverage for growth

GSB had seven J19 stainless-steel chemical tankers, vessels of between 19,000 dwt and 22,500 dwt, which are the workhorses of deepsea chemical shipping. Aurora had three.

Forming a joint operating partnership under the GSB brand would allow them to tap each ­other’s strengths and expertise to create a pool management and ship operations platform within the J19 segment to optimise returns and improve service to customers.

GSB was strong in Asia, with connections to Japanese traders. Aurora had a significant presence and customer knowledge in the Middle East and the US.

“It made a lot of sense purely as an isolated business case,” Stignor said. “Together, we are a stronger partner of high-value cargo ­owners, or high-value assets.”

Guttormsen said: “It gives us leverage for growth in the segment. The more we can do with other players with the same values and outlook makes sense.”

Forming the partnership required months of discussions, with some compromise, but both companies agreed that it needed to have people from each organisation physically sitting together, working as one team.

“There has to be a close partnership so that we can learn from each other,” Guttormsen said.

Stignor added: “It is never easy for two big companies to do something together, but we compromised because we believe in it.”

While the two companies are cooperating in the stainless-steel tanker segment, they remain competitors in other product and chemical tanker sectors.

Strong fundamentals

The 19,992-dwt Celsius Mumbai (built 2005) is one of GSB Tankers' seven J19s. Photo: Bob Adams/Creative Commons

Both told TradeWinds that the time is right for consolidation in the chemical tanker trades, as the long-term market fundamentals look very positive.

“The small orderbook points to a strong market in the future,” Guttormsen said.

Stainless-steel chemical tankers have been surfing the container market wave.

The sector has suffered over the past two decades as shippers switched to shipping chemicals and vegetable oils on boxships using Iso tank containers.

It was cheaper to transport ­parcel cargo allotments in Iso tank containers when liner operators desperately tried to fill their boxships by offering low rates.

“The industry went from chemical tankers to Iso tanks, but is now moving back to stainless-steel chemical tankers,” Stignor said.

It is not hard to understand why. In the current market, where container freight rates are high, it costs $400 per tonne to ship palm oil from Indonesia to Europe in an Iso tank container. It is only $150 per tonne using a stainless-steel chemical tanker.

“It used to be the other way around,” Stignor said. “That is why the stainless-steel market is so hot, and why the J19s did not dip along with other product/chemical tankers.”

Guttormsen noted that while strong container markets are keeping the J19s strong in the short term, other market shifts look ­positive in the long run.

The palm oil industry, which is a big user of the type, has experienced a shift of refining capacity from the destination to the origin, which is reducing the volume of lower-value crude palm oil shipped.

“There is a shift towards transporting more high-value palm oil products, and even chemical ­cargoes, which means a brighter future for sophisticated vessels such as the J19s,” Guttormsen said.

The historical challenge with J19s, he added, has been that they are deemed too small for the transpacific and transatlantic trades, and too big for the South East Asian regional trade.

“That is changing,” Guttormsen said. “The traditional intra-Asia/Pacific parcel size of 5,000 tonnes to 10,000 tonnes has moved up to 15,000 tonnes to 20,000 tonnes.”

This has put the J19s in strong demand, leading to better utilisation levels on shorter trades.