Swathe of VLCCs and LR2s set for floating storage ahead of the sulphur cap

Ageing tankers are set to be used for floating storage in greater numbers in the coming months as the days tick down to the global sulphur cap.

Alphatanker, part of AXS Marine, has reported in its latest weekly report that VLCCs are in demand for storing very low sulphur fuel oil while LR2s are being sought to hold gas oil in the run-up to the January 1, 2020 sulphur cap. Alphatanker reported that a 21-year old VLCC has just been bought by a bunker trader for $15.3m with the ship likely to be used for floating storage. “[T]he second hand market for such vessels could remain healthy going forward, buoyed by storage requirements,” Alphatanker predicted.

Meanwhile, tanker giant Euronav has decided to use one of its two ULCCs to carry low sulphur fuel oil.
For gasoil, Alphatanker noted that the time charter market for LR2s is hotting up, currently standing at levels of $18,000 a day.

“[A]s well as the oft-discussed surge in east to west middle distillate trade, demand for floating storage is playing into these high rates as most recent LR2 time charters have storage options,” Alphatanker noted in its most recent weekly report. Alphatanker expects LR2 tonnage to tighten in the second half of this year as vessels are engaged in storage close to bunker hubs and as ton miles rise in the wake of incremental long haul trade.

Commenting on the growing demand for floating storage, Ralph Leszczynski, global head of research at Banchero Costa, told delegates attending yesterday’s Maritime CEO Forum in Singapore he was expecting to see “more and more” tankers being deployed to hold compliant fuels. “People are looking to take advantage of the spread in prices,” he said.

At the same event, a host of tanker owners and managers were similarly bullish on prospects for floating storage.

“Ports are not geared to carry different types of fuel so i think for the six months from Q4 this year you will see some storage opportunities as all the ports in the world cannot carry all these fuels,” said Pankaj Khanna, a board member at Heidmar, during the tanker session at yesterday’s Maritime CEO Forum, a point of view shared by both Mark O’Neil, the president of Columbia Shipmanagement, as well as Lars Malmbratt, general manager of Stena Bulk Singapore.

Malbratt said it might not be just compliant fuels that head for floating storage.

“We are gong to see a big surplus of HSFO next year. Where will it go? Partly storage. There will be some economics in storing fuel. A lot of bunker suppliers do not have a solution to their storage right now and one solution could be ships,” Malbratt said.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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