Tanker rates on the spot market appear to have bottomed out, says Gulf Navigation's chief executive.
"Shipping is a very cyclical business, but the consensus view is that we are currently at or very near the bottom of the cycle triggered by the financial crisis in 2008 and that far better times are ahead of us," said Atle Sebjornsen, who heads the shipping company based in Dubai.
"Global [oil] consumption is catching up while ordering of new ships has slowed down, which suggests that a more favourable balance and strong markets lie ahead."
The shipper, which owns and operates 15 chemical and oil tankers, has two additional very large crude carriers (VLCC) under construction that will be launched next year and in 2013.
The new ships will start their operations immediately on the delivery dates under the terms of 10-year charter agreements worth more than Dh1.05 billion (US$285.8 million), Mr Sebjornsen said. Although demand for oil continues to recover and consumption in China and other emerging markets has increased markedly, spot rates have recovered only marginally over the past few years as tanker capacity has swamped demand for oil shipments.
Gulf Navigation, listed on the Dubai Financial Market, is down 15 per cent to 35 fils a share since January.
According to Frontline, the world's largest supertanker operator, the industry abstained from ordering any VLCCs in the first quarter, and 28 per cent of new vessels slated for delivery during that period are yet to arrive.
In the past six months, VLCCs travelling from the Middle East to the Far East charged an averaged day rate of $19,129, well below Frontline's break-even rate of about $29,700.
At times, these day rates dipped as low as $5,045.
The Bloomberg Tanker Index is down 24.7 per cent so far this year to 372.76 points.
Over the past decade the index almost doubled from the start of 2003 to 2004, only to lose more than half of this gain by early 2006. From the start of 2007, the index put on 70 per cent to 2008, only to drop back by almost two thirds since. Gulf Navigation is moving forward with the establishment of a Saudi company specialising in the crude-oil shipping industry.
The company plans to develop a fleet to include nine VLCCs by 2015, with a total capacity of 18 million barrels.
Gulf Navigation intends to position itself as a transportation link between the Saudi market and China to meet the increasing oil demand expected over the next 20 to 30 years, Mr Sebjornsen said.