Trafigura is preparing to take delivery of its entire 35-ship tanker newbuilding haul in 2019, with 24 of the ships due in the first quarter.
Global head of wet freight shipping Rasmus Bach Nielsen said the orders are “a historical freight transaction for Trafigura”, ranking in the top three in size of the group’s commitments in the 2018 accounting year.
Bach Nielsen said there were several driving forces for the deal, which was initially announced as a 22 leasehold newbuilding deal in June 2017 that has since been expanded with optional vessels.
Financing structure
He lists the access to “a very attractive financing structure” and “long-term leasing with options to purchase” as among the drivers.
The potential historical low entry point price with the shipyards was another factor, where the leasing rates and all purchase options have been determined.
Low interest rates were another draw. Bach Nielsen revealed that Trafigura’s investment in the newbuildings has been hedged, leaving the group protected from any increase in rates.
“It is actually quite a significant hedge — $1.55bn of Libor exposure that has been hedged in full,” he said.
IMO 2020 effect
The improved market prospects, largely governed by what he describes as the IMO 2020 effect, were another consideration behind the ground-breaking move for the trader.
All the 35 vessels — separately the group has ordered four VLGCs — are being fitted with scrubbers, although the company has yet to comment publicly on what type of system it has selected.
“On the newbuildings — scrubber was the solution,” he said.
Bach Nielsen added that Trafigura looked at LNG fuelling but found it “economically unviable, unfortunately” and the pricing still too far adrift to opt for “LNG ready” ships.
Trafigura believes low-sulphur fuel oil will be available and that there will be a price spread with high sulphur fuel.
“It goes down to the investment decision of investing in the scrubbers with what we view as a two to three-year repayment profile,” he said.
