Danish product tanker owner Torm will not be joining the recent rush to order newbuildings.
The Copenhagen-listed company’s chief executive Jacob Meldgaard believes the secondhand market makes more sense at the moment.
Already this year, Torm has spent $233m on seven secondhand LR1s from Jo Tankers and Glencore and $97m on three MR tankers. Meldgaard is not naming the seller of these ships.
But he told TradeWinds: “If you gave me the optionality, what would you like to do, go and order 10 newbuilds or this, then I prefer to do this.
“I think we need to be disciplined. Let’s face it, shipping is a volatile industry over time. We are in a strong market environment right now but geopolitics could change,” he said.
Meldgaard said no one could have foreseen a couple of years ago how the market is playing out right now following the Ukraine war.
“So also the fact you get the assets now is just different than adding to your fleet of these conventional cargo vessels with a delivery in 2026,” the CEO added. “This is our preference right now.”
Secondhand asset values have risen strongly over the last year, but Meldgaard said: “I like the price. We wouldn’t have done this if we didn’t see it as value-adding for our shareholders.”
The company has also arranged $123m of new bank financing to spend on more secondhand deals.
“It’s just to be prepared, you never know what opportunities come,” Meldgaard said.
“And let’s be honest, you also don’t know how the banking environment is. We did not foresee there would be the current turmoil around banks obviously,” he added.
The CEO explained that Torm will not now have to jump through all the usual hoops if there is a deal it likes.
“It’s great to have the backing of our banks in those circumstances. Kudos to them,” he said.
No rush to sell
The owner sold eight older ships in 2020, bringing in only a 2016-built LR2.
The company retains 11 tankers built between 2003 and 2005.
But Meldgaard is in no rush to offload other ships.
“Whenever we see our efforts are best served by continued employment that’s what we do, and if there’s a good price, then we will of course sell,” he told TradeWinds.
“But there are no particular plans to offload at this juncture,” the CEO said.
Strict focus on sanctions compliance
Torm has all 88 ships on the water. “We think that’s a strong position to be in,” he added.
Meldgaard is sure the company will be approached by brokers looking to buy vessels for the shadow fleet of tankers trading in sanctioned oil.
“Not only due to the current situation, but in general we have a very tight focus on everything that is related to sanctions,” he said.
“I’m sure that we have a very strict system in place so that we don’t do something that we didn’t want to do,” Meldgaard added.