Tanker Billionaire John Fredriksen Buys Ships for $610 Million Amid Slump
Wednesday, 15 February 2012 | 11:00
Shipping billionaire John Fredriksen spent about $610 million to buy new vessels and indicated he may make more purchases this year, a sign that a plunge in prices might be near an end.
Fredriksen ordered six oil-product tankers from STX Offshore & Shipbuilding Co. for 235.5 billion won ($210 million), the Changwon, South Korea-based company said today in an e-mailed statement. He also is chairman of Golar LNG Ltd. (GOL), which placed orders worth $400 million with Hyundai Samho Heavy Industries Co. for two ships to haul liquefied natural gas and said it’s in talks on buying more.
The billionaire, ranked by Forbes magazine as the world’s 72nd-richest person, said in May he expected ship prices to collapse “within a year or two,” after which he planned to return to the market and buy tankers. A glut of vessels reduced earnings for the largest carriers of crude oil to the lowest level in more than 14 years in 2012, and the Baltic Dry Index, a gauge of costs to ship commodities, reached a 25-year low.
“He knows what he’s doing,” Simon Newman, an analyst at shipbroker ICAP Shipping International Ltd. in London, said by e-mail. “If he is the first mover, he’ll pick up cheaper assets and orders, so even if the market does bump along the bottom for longer, others moving after him will have to pay more.”
Golar’s order includes options to buy two more ships. The tankers ordered from STX are so-called medium-range vessels, each with a carrying capacity of about 50,000 deadweight tons, hauling refined oil products such as jet or diesel fuel.
“Medium-range tankers are the most promising sector for the next few years,” Steve Christy, head of research at London- based EA Gibson Shipbrokers Ltd., said by phone. Orders for the ships were fewer since 2009 than those for other types, curbing supply, and a shift in new refineries to India and the Middle East from the U.S. and Europe means shipments must be carried for longer distances, supporting demand, he said.
New tankers are the least expensive to order in 10 to 15 years, and energy-efficient designs give even greater savings over older ships, shipping-industry newspaper TradeWinds and London’s Financial Times cited Fredriksen as saying in interviews in the past two weeks. The billionaire plans to make a “substantial” order later this year for very large crude carriers, the biggest oil tankers, according to the FT.
“A major newbuild order would be a material negative for the tanker market, as limited ordering has been the lone bright spot in an oversupplied market,” Michael Webber, an analyst at Wells Fargo Securities LLC, said in a report today.
Fredriksen has a net worth of $10.7 billion, according to Forbes. The 67-year-old, now a Cypriot citizen, has public and private shipping investments spanning container vessels, dry- bulk carriers, oil tankers and offshore drilling rigs.
The 109-vessel fleet owned by Fredriksen is worth $3.55 billion, according to VesselsValue.com, a unit of London-based shipbroker Seasure Shipping Ltd. That excludes the billionaire’s stake in Seadrill Ltd., an owner of offshore rigs. Hemen Holding Ltd., a company indirectly controlled by Fredriksen, has a 25 percent share of Seadrill.
Hemen, the biggest shareholder of Frontline Ltd., in December provided guarantees of $505.5 million and split the tanker operator in two, forming a second company called Frontline 2012. Frontline, previously the world’s biggest operator of crude tankers, said it was running out of cash and risked defaulting on loans because of the market downturn.
Costs for new ships plunged as Asian yards began dropping prices early in 2009 to win contracts. Medium-range tankers have slid 37 percent from the peak of $53.5 million in August 2008, according to data from Clarkson Plc, the world’s largest shipbroker. LNG carriers have stayed between $202 million and $200 million since May, down from a record $250 million in October 2008, the figures show.
“He, as well as many others, believes we are near or at the bottom,” Thomas Zwick, an analyst at Oslo-based shipping consultant Lorentzen & Stemoco AS, said by phone today of Fredriksen. “The proof remains to be seen.”
Average earnings for medium range tankers fell 1 percent today to a daily $7,512, extending the year’s decline to 59 percent, according to Baltic Exchange data. The London-based exchange assesses freight costs on more than 50 international maritime routes.
The billionaire briefly owned a fleet of product tankers in 2001, inherited in a takeover of Osprey Maritime. He sold at least 10 to a company owned by Stelios Haji-Ioannou, founder of U.K. budget airline EasyJet Plc, within months of the transaction.