Petrone: Floating Storage Making a Big Comeback

Floating storage of oil is expected to make a big comeback according to Ted Petrone, Vice Chairman of Navios Corporation.

“I think it’s going to come back in a big way,” Petrone said during a conference call on Navios Maritime Acquisition Corporation’s Q3 results.

One of the factors contributing to the reemergence of the trend that practically disappeared since 2016 is the reimposition of the U.S. sanctions against Iran as Tehran is expected to keep its production high and store it on board very large crude carriers.

The IMO’s global sulphur cap coming in 2020 is also expected to create demand for storage of both heavy fuel oil and clean oil.

“I think the whole IMO issue plays into better ton miles and less vessels in transit with a lot more floating storage,” he added.

Navios has several VLCCs in their teens and would prefer using them for floating storage than scrapping the vessels as the global fleet has already seen negative growth.

Namely, as of November 2 there were 102 VLCCs  on order which compares favorably to the 85 vessels that are 17 years of age or older. Year-to-date, 38 VLCCs were removed from the fleet. With 35 VLCC new building deliveries so far net fleet growth year-to-date stands at a negative 0.2%.

Given the outlook for continued ton mile growth, the supply-and-demand fundamentals look favorable going forward, Navios said.

Speaking on the way forward for Navios and the 2020 sulphur cap, Angeliki Frangou,  Chairman and Chief Executive Officer of Navios Acquisition, said that overall the IMO regulation is expected to boost demand for product tankers.

With relation to the company’s approach to becoming compliant, Frangou explained “it’s a matter of really whatever our clients would like, we will do at their cost. I mean, we do not want to be part of a spread economics, but mostly to cover our cost and time.”

Commenting on the debate on scrubber installation in the industry, she said that the company was “agnostic about this.”

“If we are paid, we will install scrubbers, and we have done that with newbuildings. But overall, we are agnostic about this. This is about the price spread and how you capture it.”

She added that a lot of blended fuels will be tested ahead of 2020 and that the company is also looking into these.

“We have been asked from certain long-term charters and we have agreed to test these. So there are multiple strategies. Overall, we firmly believe that the availability of compliant fuels will be there.”

However, the question is where will these fuels be available which is likely to result in a lot of inefficiencies.

Navios Acquisition’s net loss for the three month period ended September 30, 2018 was USD 23.4 million as compared to USD 8.1 million for the same period of 2017. Net loss for the nine month periodwas USD 69.9 million as compared to USD 66.9 million year-on-year.

“Since September, tanker rates have substantially improved, with the TD3 VLCC spot rate increasing by 213% to about USD 51,000 per day and the one-year time charter rate increasing by about 44% to USD 28,000 per day. In light of this, not only is the combination with Navios Maritime Midstream Partners L.P. expected to reduce operating breakeven for available days -not subject to fixed rates- by almost 15%, but also to increase our available days by 17% to about 15,000 days, “ Frangou pointed out.

World Maritime News Staff