Worldwide pool plan receives cool response
HONG KONG Ming Wah Shipping has given a cool reception to Worldwide Shipping's plan to create a pool of large tankers to help lift rates in the chronically depressed tanker market.
To Wing-sing, vice-chairman of Hong Kong Ming Wah, said the complexity of operating vessels in pools meant the content of the pool had to be clear before he would commit Ming Wah's tankers to the project.
He added there were many differences between small and large tanker owners and operators of old and new tonnage.
The comments follow a radical plan proposed by Worldwide Shipping - the territory's largest and one of the world's biggest tanker owners.
Ming Wah, the shipping arm of the China Merchants Group, is Hong Kong's second largest operator of large tankers.
Backed by its chairman Helmut Sohmen, Worldwide has suggested that independent operators of large tankers should create a pool of about 80 very large crude carriers (VLCC) - tankers between 200,000 deadweight tonnes (dwt) and 300,000 dwt.
Worldwide hoped this would increase the negotiating powers of tanker owners with charterers.
Although daily charter rates for VLCCs have risen to about US$20,000 to $25,000, some of the newer ships still need about $40,000 to break even.
Worldwide, founded by shipping magnate Sir Y K Pao, has a tanker fleet of 28, of which 21 or 5.8 million dwt are VLCCs.
Although Mr To conceded the tanker market was suffering from low rates, he was reserving judgment on Worldwide's plan.
It was difficult for shipowners to agree to the operation pools in the dry bulk sector and would be even harder for tanker operators in the large tanker sector, he said.
In the dry bulk sector, charter differentials might be only $1,000 per day, but in the large tanker sector differences climb as high as $10,000 per day, he added.
This is important in the VLCC carrier market with the 'two-tier' system of freight rates, with new ships commanding a premium over older ones.
Rough plans for the pooling tankers would have to be shaped to make the pooling arrangement transparent, he said.
'Everything depends on the benefits.
'Even for the dry cargo pool, it's not easy for you to pool with other owners unless you have the mutual benefits.' Another concern was whether a pool of large tankers would fall foul of anti-trust laws in the United States, he said.
About two years ago, a handful of major independents met secretly to debate an alliance, but it collapsed, primarily over fears of US anti-cartel laws.
Worldwide's plan suggests that the owners with fewer than four VLCCs would pool their vessels in a common management system.
Then the entire fleet of ultra-large crude carriers (ULCC) - or crude vessels greater than 300,000 dwt - would be placed into one pool.
Worldwide operates two two-year-old 300,000 dwt tankers built for $100 million.
These vessels need $40,000 per day to cover costs but are reportedly earning less than half this rate.
Another aspect of Worldwide's plan is to improve market information. This would be made available to owners in order to combat oil company moves to depress rates.
The company is suggesting that shipping companies take a more aggressive attitude towards charterers.
It is also seeking more stability in charter rates to prevent a destabilising rush of orders.
The initiative is being handled through its London agency, Marine Navigation Co Ltd.
Critics said the project could prove counter productive and that a substantial rate rise would encourage new building programmes which would force the market back to its previous levels.