Filenews 18 February 2023
A fleet of oil tankers worth $2.2 billion has been assembled to keep Russian crude and fuel exports flowing, according to Bloomberg.
Now, as some fare prices rise sharply, executives are starting to wonder if they'll ever return to serving everyone else.
The often older ships, which began to emerge when a barrage of ships began to change hands to unknown buyers at exorbitant prices last year, have cut off a chunk of the conventional fleet. Since sanctions on Russian refined fuels came into effect earlier this month, ships carrying petroleum products across the Atlantic have increased their daily profits fivefold.
The composition of the exact size of the shadow fleet is almost impossible, since the details of ownership - and the capture of most individual ships in Russia - are shrouded in secrecy. Commodity giant Trafigura estimated that the total number of ships could be 600, of which 400 are crude oil carriers. Privately, some shipowners place the number slightly lower - between 10% and 12% of the world tanker fleet.
Regardless of whether they leave the international market for good or simply avoid it, the result could be higher shipping costs for Russia's competitors.
"These ships will be dedicated to these shady transactions and will de facto move away from the markets in which we will find ourselves," said Gernot Rappelt, commercial director of Ardmore Shipping, which manages a fleet of fuel and chemical tankers, in a call for profits. "In fact it's still important in terms of mileage tones and it's probably even more important when you consider that it's very inefficient."
Tonnages are a measurement of ship demand, multiplying how much cargo ships carry by distances related to deliveries.
VesselsValue, which tracks ship sales and purchases, estimates that a little more than $850 million was spent last year on expanding the "dark fleet" of fuel tankers. In addition, nearly $1.4 billion was invested in crude oil carriers.
London-based EA Gibson Shipbrokers has counted at least 38 fuel carriers owned by companies registered in Russia, but says the actual number is likely to be higher, as hard-to-find offshore brass companies will own more ships. It has also counted over 100 fuel tankers sold to countries outside the G-7 or the European Union since the invasion of Ukraine.
"While Russia does not explicitly control so many ships transporting goods, given the large number of older used tankers sold after the invasion, it is likely that Russia will have access to sufficient ships for this volume," said Richard Matthew, Gibson's head of research.
It is crucial that, in addition to the fleet divided into Russian and non-Russian, the European Union's ban on almost all sea oil imports from its former trading partner means that ships have to travel longer distances. This has made the fleet much less efficient, increasing the demand for ships and the cost of fares.
According to officials of the shipbroking sector, the withdrawal of refined fuel tankers from Russia is already affecting the supply of ships elsewhere.
Markets for clean oil shipping – such as diesel and jet fuel – are currently strong, according to Torm A/S, which has a tanker fleet. There is increased demand in the Middle East for shipments destined for Europe, as well as many shipments from refineries in East Asia, the company said via email.
Ships carrying refined fuel across the Atlantic earn $55,000, up from $10,000 a day at the beginning of the month. Crude carriers are approaching a similar amount, having briefly surpassed $100,000 a day late last year.
In the longer term, shipowners point out that the limited supply of new ships reinforces the hypothesis of consistently high fares.
The tanker order book is currently at a 40-year low, according to Brian Gallagher, head of investor relations at Euronav NV, while Ardmore also pointed to low levels of ship additions to its recent earnings.
A more pressing issue for transporting oil and fuel around the world, however, is how many ships Russia uses.
If trade remains disrupted and the Russian-friendly fleet does not return to serving Western markets, the cost of transporting fuels such as gasoline and diesel may remain higher for a longer period of time.
"We have a feeling that many of these businesses that buy older ships are funded by Russian capital, in some shape or form," said Schwein Moxnes Harfgeld, chief executive officer of DHT Holdings, an oil tanker company. "We have a hard time believing that they will stay in business over time or that they will ever return to compatible markets."
