Vitol is bolstering its owned fleet with an order for a series aframax product tankers that will run on conventional fuels, amid talks for another batch of dual-fuel ships.
The energy and commodity trader is poised to spend more than $500m to order up to eight vessels.
Shipbuilding sources said the trader has kicked off its fleet expansion with a deal at Hyundai Mipo Dockyard (HMD) in South Korea for four 115,000-dwt product tanker newbuildings.
They added that HMD’s sister shipyard, Hyundai Vietnam Shipbuilding, has been assigned the task of constructing the LR2 tankers.
The order marks the MR tanker specialist’s debut in aframax tankers. Hyundai Vietnam is slated to deliver the quartet by March 2024.
Officials at HMD declined to comment on the company’s shipbuilding activities, citing contract confidentiality. Vitol declined to comment on its shipping activities when contacted.
Shipbuilding sources have linked Vitol’s tanker order as the four aframax newbuildings announced by Korea Shipbuilding & Offshore Engineering (KSOE) on Monday.
The Hyundai Heavy Industries Holdings unit that controls shipyards within the group said a European company had ordered the quartet of newbuildings. It said the contract was worth KRW 257bn ($226m), or $56.5m per ship.
Shipbuilding sources said based on that price tag, the LR2 newbuildings that Vitol has booked are expected to run on conventional marine fuels.
Meanwhile, sources said Vitol is holding newbuilding talks with China’s Guangzhou Shipyard International (GSI) for a similar number of LR2s.
However, the trader is said to be looking to order dual-fuel vessels that can run on conventional fuels and an alternative fuel believed to be LNG.
“The newbuildings discussion is still taking place and no contract has been signed,” a shipbuilding source said.
Officials at GSI were not available for comment.
The shipbuilding player believed the dual-fuel LR2 tanker newbuildings at GSI would cost Vitol around $68m each and the shipyard is only able to deliver the ships in 2024 and 2025.
This reflects a 13% hike in newbuilding prices since last-done deals as a result of a hike in the cost of steel plate.
GSI’s last won a LR2 order in October when Vista Shipping, the joint venture between Hafnia and CSSC (Hong Kong) Shipping, booked four dual-fuel vessels at a reported price of $60m apiece.
According to Clarksons’ Shipping Intelligence Network, Vitol subsidiary Elandra Tankers is listed with two Daehan Shipbuilding-construct LR2 tankers — the 110,000-dwt Elandra South and Elandra Bay (both built 2018). John Fredriksen’s Seatankers sold the duo to Vitol in 2019 as part of an en-bloc sale for $97.4m.
Singapore-based Elandra also owns four VLCCs, two suezmax tankers, one aframax crude tanker and nine MR tankers.
Clarksons data shows Vitol subsidiaries own a total of 49 ships totalling 1.68m dwt, including MR tankers and four VLGCs.
Banchero Costa shipping analyst Ralph Leszczynski said the current spot market for LR2 is dreadful but ordering newbuildings should be about the medium and long term, which looks brighter.
“The world in 2022/2030 will be pretty similar to the [old normal] of 2019,” Leszczynski said. “Oil demand will return to pre-pandemic levels.
“Product trades are steadily shifting away from local short-haul cross-Mediterranean or UKC-to-UKC [UK and continental Europe] trades towards longer-haul trades such as from the Arabian Gulf to ASEAN [Association of Southeast Asian Nations] or India to South Africa or South Korea to Australia. As such, LR2 tankers have been seeing more demand growth than MRs, and this trend will continue.”
He added that contracting activity for newbuildings has been relatively modest in recent years.
“For the product tanker sector as a whole, the orderbook to trading fleet ratio is now just 7.2%, whilst 8% of the trading fleet is currently older than 20 years of age,” he said. “As such, we are in fleet-renewal territory, not fleet expansion.”
He said some 22% of the product tanker fleet is 15 to 20 years old.
“The age profile shows that there were huge numbers of tankers built from 2003 onwards, and they are rapidly approaching retirement age,” he said.
“We will soon be scrapping tankers, unless oil majors relax their restrictions on overage tonnage, which I highly doubt they would, given that media and political pressure on their environmental record will only intensify in the coming years.”
