Diamond S Shipping is poised to start renewing its MR product tanker fleet in the coming months, chief executive Craig Stevenson has confirmed.
New York-listed Diamond’s 52-strong fleet has an average age of 10 years, with five ships exceeding 13 years and seven over 12 years old.
“We do look at the age profile, and at some point in time, we have to start addressing the age profile on the product side of the business,” Stevenson told analysts on the Connecticut-based company’s quarterly earnings call.
Long process
“And so, that's something that we actively have talked about, and anticipate that taking place sometime this year, at least starting that. It's a long process, but it's a process that we need to start.”
Diamond S’ product tanker tonnage aggregates more than 2.5 million dwt and has an overall estimated value of $868m, according to VesselsValue.
A large chunk of the fleet came through Diamond’s landmark acquisition of 30 MRs from Cido Shipping in 2011 in a $1.2bn deal.
Last year’s merger with Evangelos Marinakis’ Capital Product Partners added a further 21 MRs to the mix.
Diamond’s 15-unit suezmax fleet is relatively young, with an average age of six years.
The company said quality secondhand tonnage is its preference as it begins renewal talks, but is not ruling out other options, Stevenson said.
“Practically speaking, I think we first look at existing ships on the water that are high-quality ships, and that's where we would start to turn first,” Stevenson said.
I think we first look at existing ships on the water that are high-quality ships... something else that makes a lot of sense today is to look at someone else's order that's already been placed, and it's in line. And so, that's another attractive way to rebuild your fleet
Craig Stevenson
“And it is only once we get into a long-term contract where someone wants a brand-new ship that we would be aggressively pursuing newbuildings.
“But I would tell you that something else that makes a lot of sense today is to look at someone else's order that's already been placed, and it's in line. And so, that's another attractive way to rebuild your fleet.”
IMO 2020 effect
After a loss-making second quarter, Stevenson detailed the factors that he believes suggest better times ahead in 2019 and beyond: a low orderbook at about 9% for both products and suezmax tonnage, a return of refinery capacity and market dislocations stemming from the IMO 2020 emissions deadline.
“I think that we're all doing what everyone is doing: We’re waiting for the IMO 2020 and the low orderbook to work its way into spot rates and long-term rates,” Stevenson said.
'Nuggets' of positivity
“Long-term rates, they’ve certainly gone up. I think you're also seeing values trickle up as well as a result of those time-charter rates. The spot rates have been the laggard here, and that's what quite frankly everyone wants to know when 2020 kicks in.”
Stevenson said there had been “nuggets” of positivity, including inventories beginning to draw down and discussions about cleaning of tanks ahead of the IMO 2020 deadline.
“But activity levels, certainly in the MR side and quite frankly somewhat on the suezmax side, it’s still been very lacklustre,” he said.
