The argument to join a commercial pool has a new impetus this year.
The argument for pools has always tended to focus on their defensive qualities. Historically, pools have flourished, fleet-size-wise, in tough markets; strength in numbers, as such.
This year, however, there’s a new reason for pools to prove attractive: regulation from the International Maritime Organization in the form of the controversial Carbon Intensity Indicator (CII).
CII headache
All of a sudden, following the introduction of CII on January 1, owners and operators have more to factor in with every voyage, rather than simply following the money. CII will keep commercial pool managers very much on their toes, and ultimately will require greater investments in technology and data to ensure fleets are trading in optimum conditions.
“Managers will need to take into consideration the impact that their commercial trading strategy as a whole will have on individual vessels’ CII. This will be a challenge as the best financially yielding trading strategy may not automatically yield the best CII,” says John Michael Radziwill, who is in charge of Monaco-based C Transport Maritime (CTM), a dry bulk pool founded in 2004.
Pankaj Khanna, who took over the running of Athens-headquartered tanker pool Heidmar in 2020, says that pools offer a great deal of flexibility to owners and have always been a great way to aggregate income and for cashflow purposes.
“Going forward,” Khanna says, “the trading of ships is going to determine the CII rating of vessels and access to the right commercial people, with the right tools, training, mindset and knowledge is going to be critical to ensure a good CII rating.”
EU ETS factor
It’s not just CII that is causing concern for owners. The European Union’s determination to get shipping included in the bloc’s emission trading scheme will also likely require a prepared and knowledgeable commercial operator to trade carbon offsets, according to Khanna.
“The scale of the decarbonisation challenge is set to stretch many shipowners’ bandwidth and cash flow close to breaking point, while many parts of the industry are already facing pressure to deliver,” argues Matthew Smith from London-based VLCC pool operator Tankers International. “It is critical,” he says, “that tanker owners maximise the support that is available to them – from technical, to practical, to cash flow – and that charterers are provided with more options.”
Pool operators will have to be nimble and train their chartering and operations staff to deal with the coming decarbonisation regulations, Khanna advises.
Sourcing green fuel
With green, alternative fuels coming into the mix, their scarcity and price could be a big bonus for commercial pool operators, says Vinod Sehgal, who runs Hong Kong manager SeaQuest Shipmanagement.
“Environmental concerns and carbon footprints are a serious commercial consideration for commercial pool operators,” Sehgal says, adding: “Use of expensive alternative fuel and availability of compliant vessels will force shipowners to work with commercial pools rather than operating in isolation on fixed trades or routes.”
A commercial pool will have greater flexibility in utilisation of vessels, Sehgal asserts, and for this reason he feels commercial pools will become more prevalent in the future.
When rates spike
The problem for pool operators this year might be the spiking markets. In tankers, spot rates have leapt above $100,000 for VLCCs, while bulk carriers are showing some uptick after a muted start to the year.
Danilo Fumarola, who heads up Monaco-based shipowner Gestion Maritime, warns that in the event of a prolonged period of elevated spot rates, owners will be tempted to leave the constraints of a pool in order to either sell vessels, or secure long period employment. Pools need to be flexible as possible, he urges.
This article is one of many reports carried in our brand new 68-page Shipmanagement Market Report. Splash readers can access the full magazine for free by clicking here.
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