Oslo: The new boss of Frontline Management is on the cover of the latest issue of Maritime CEO magazine, which launches today.
Tankers are famously volatile – few can have observed that more closely than Robert Macleod over the past seven months. The Norwegian was appointed as CEO of John Fredriksen’s Frontline Management last November at a time when many were writing the company off, suggesting it was close to bankrupt extinction. Now, however, just over half a year into his reign and the company is smelling of roses.
Macleod took over from one of Fredriksen’s key lieutenants, Jens Martin Jensen, at a time when many were questioning whether the company would be able to pay back its bonds which were coming up for maturity.
Macleod had been with Maersk from 2001 to 2004, then Glencore through to 2011, before running his own company, Highland Tankers until Fredriksen came knocking, taking on the CEO role at one of Fredriksen’s flagships at the age of just 35.
He took the reins at Frontline with five months to go until its bond was due to mature, and with the company weighed down with $1bn of debt and lease obligations. VLCC and suezmax rates were still low and speculation was rife that restructuring was on the cards.
However, as is the often the case with John Fredriksen-related companies, the fat lady did not sing. Rates rallied, initially with a number of VLCCs including Frontline ones going out as floating storage. The bond is just about paid to the astonishment of many. Commented local newspaper Dagens Næringsliv: “Whoever one or two years ago had said that the owners of the convertible bond in the tanker company Frontline at maturity today would come to get back all their money were probably taken away by men with white coats.”
The suddenly firmer footing now looks like Frontline will merge with Frontline 2012, the vehicle Fredriksen spun off four years ago. Fredriksen has been in a merging mood of late – bulker firms Golden Ocean and Kingtsbridge Shipping have joined forces while Frontline Management itself tied up with Tankers International last October to create VLCC Chartering.
Tanker owners across the world are in consolidation mode as rates firm. For Macleod, the recent tanker bull run is, he says, the beginning of a recovery.
“The next five years will be a lot better than the previous five,” he says, outlining how with less capital available the risk of oversupply should be reduced. “We are now seeing a strong spot market, without prices being pushed, which is a healthy sign,” he observes.
The main reason for the uptick in tanker rates is the lengthening ton/mile scenario, Macleod reckons with plenty more long voyages from the Atlantic basin to Asia. Moreover, he thinks a two-tier market is developing between older and newer vessels.
“Modern vessels are in demand and the market is finally not in oversupply,” Macleod says.
Another factor is port delays, which has taken out capacity. Basra is one example given by the Frontline CEO where delays can last up to 25 days.
The final reason for the uptick is down to owners’ confidence, which is strong after many years with a weak market. “Sentiment is important,” Macleod says.
In terms of making investments in the fleet, Macleod still feels prices will actually decline more and he says he will be patient before buying much more tonnage. Product tankers make for the best investment at the moment, Macleod thinks.
Frontline Management currently controls 67 vessels. Two thirds are crude – a mix of VLCCs and suezmaxes, and the rest are product carriers.
“We are constantly looking for opportunities in the market and we are likely to grow going forward,” Macleod tells Maritime CEO. His take on the tanker markets as a whole is perhaps a sign of things to come from this Fredriksen vehicle. “Consolidation will only increase, which is healthy,” he concludes.
Macleod is one of four Norwegian owners profiled in the magazine, which is destined for Nor-Shipping in Oslo in a couple of week’s time. The magazine has a decidedly Scandinavian flavour to it with insights into Norwegian offshore and finance as well as a useful travel guide to the Norwegian capital. There’s also our second annual Rich List, identifying the world’s most valuable fleets.