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June 23, 2018

Marine News

Marine News

TANKERS: Shift in Chinese crude demand sees International Seaways expand VLCC fleet

Houston (Platts)--8Mar2018/325 pm EST/2025 GMT


A shift away from OPEC countries by Chinese crude buyers to importing more Atlantic Basin crudes was helping increase ton-mile demand for tankers, International Seaways President and CEO Lois Zabrocky said Thursday.

The shift in demand by the Far Eastern crude purchasers saw the company agree to acquire six modern VLCCs for $434 million to be delivered in the second quarter of 2018.

"Modern VLCCs will earn higher rates," CFO and Senior Vice President Jeffrey Pribor said during the company's quarterly earnings call.

He added, however, the higher earnings would narrow as market conditions improved.

The acquisitions were part of a broad strategy the company was employing to rid itself of older tonnage in favor of newer, more modern ships.

In total, the company plans to invest $600 million dollars in fleet upgrades.

The company had no intentions of issuing equity to fund the purchases instead using a mixture of proceeds from sales of other tankers and sale-and-leaseback agreements, Pribor said.

Pribor said the company looked to "capitalize on market recovery" in the crude and product tanker sectors by taking advantage of assets that are well below historical values.

Zabrocky concluded the company would need to absorb the large VLCC transaction before taking any other action in the tanker acquisition market.

"We are still in the process of concluding the VLCC transaction; we want to digest that before making any other moves," she said.

--Alan Tomczak, alan.tomczak@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com


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