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Tanker market to be plagued by oversupply in 2011, bunker prices heading upwards as well

Oversupply issues will continue to be a crucial factor for the tanker freight market during 2011 as well, said Mr. Alexandros Prokopakis, General Manager-Bunkering with Mamidoil ““ JetOil SA in an interview with Hellenic Shipping News Worldwide.

Still, he remains optimistic about the market from the middle of 2012 onwards. Until then though, tanker owners will have to be cautious regarding their investment and chartering strategies, especially as operating costs are facing increases.
According to Mr. Prokopakis, this year’s very competitive bunker prices are unlikely to be repeated next year, as economies and demand grow. As for tanker prices, although current values appear rather attractive, Mr. Prokopakis appears rather cautious saying that now isn’t a good time to buy.

How did your bunkering division perform so far this year?

It was a challenging year. We are happy with our volume despite the economic uncertainty and the decline in the Greek market. We are not happy with our margins and our collection days. This year the prices among the competition where very competitive and that resulted in lower margins.
Due to the worldwide economic situation there were some receivable issues but we are doing much better now since we reacted very fast.

How does Jetoil Bunkering secure the quality of its fuels?

We have tested numerous times our supply sources. We have a long term relationship with our suppliers and we always do random checks. We are known for our quality! Every cargo is tested at the source and always before discharging.

Do you think that in 2011 bunker fuels prices will be higher or lower than 2010 and for what reason?

I wish that I could predict that. The fundamentals have changed and prices are not only based on supply and demand. There is a lot of paper trading. Single events can affect prices either way.
I have a feeling that prices will go up as country economies and demand grows.

As we already know, bunker fuels are at the epicenter of global regulations to limit the shipping industry’s CO2 impact. Which are the key measures implemented or soon to be implemented, which will in turn affect the bunker fuel market?

IMO Annex VI regulates SOx, NOx, PM (particular matters) and CO2 from emission.
The limitations to the above have an aim to improve the quality of fuel which will result in a better life for the ultimate fuel user and the environment. The reduced emissions will make life better for the general public. For all of us involved in the supplying the shipping industry we have little influence of the specifications. As fuel quality gets more complex and standards more stringent, suppliers and traders need to engage the process to bring a perspective on to the current supply environment.

Are those goals set realistic, or do you think it will be hard for the industry to implement them?

The industry is still looking and exploring alternatives. One alternative is the Emission Trading System that is widely discussed.Β  Another alternative is solutions through technology. The production of “better fuels” is another option. The goals that are set now I believe that are hard to reach and they will be amended. We are not ready for such a change at the time frame provided. Of course a lot can change in a year or two.

How will those measures be put to effect? Does the market or even the ships have the necessary “tools” to burn lower sulphur fuels?

How those measures will be put in effect is something still under research. I don’t think that we need to spend time on the enforcement at this point. We need to know the alternatives and make the best possible decisions. The tools, in theory, are available the cost and the implementation is the challenge and the concern.

Will it be cost effective or will ship owners have to calculate additional operating costs for their vessels?

One thing that it will not be is cost effective. It will be environmental friendlier but not cost effective. More cost, not only in fuels, in lubs, treatments etc will have to be calculated.

Jetoil is also active in the tanker industry, through Styga Maritime. How would you evaluate this year in terms of business performance?

I just want to make clear that STYGA is not an affiliate of JetOil. The two companies have some common shareholders and they are perceived as a group from the market, there is no direct relation. It was a difficult year. Despite the low charter rates we also had some legal issues that consumed a lot of our time.

What is the company’s fleet profile?

We own and operate three product tankers.

For a series of weeks, tanker freight rates had been taking a beating. Why was this occurring and what did you do in order to better secure your company from this downfall?

I have a strong belief that there are too many vessels in the market and the demand isn’t growing as expected. We are a small traditional ship owner with two out of our three vessels on long time charters. So we don’t get full benefit of the market when rates are up but we are not affected much when rates are low.

How do you assess the prospects of the tanker market in the coming months? Do you think that the oversupply issue will continue to be a crucial factor?

Of course the oversupply will continue to be a crucial factor. I have a very negative feeling for 2011 but I want to believe that mid 2012 onwards things will start to improve.

Will you be looking to add new vessels to the fleet or do you believe that current prices aren’t yet that attractive?

Prices are attractive, in some cases very attractive but that doesn’t mean that it is a good time to buy. I will give you an example. Let’s assume that you just lost your job and things aren’t looking that good. A very good friend offers you a nice car that usually cost 150,000€ down to 40,000€ would you buy it?Β  I wouldn’t!Β  Some ship-owners disagree with this way of thinking but this is how I see it. Prices are very attractive but I don’t believe that it is a good deal at this particular time.
I want to thank you for the opportunity to express my views to the readers of “Hellenic Shipping News”.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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