Maersk Tankers sees pick-up in M&A

Friday, 03 July 2009

Maersk Tankers, the largest product tanker group, expects merger and acquisition activity to pick up at the expense of commercial pools, allowing shippers to cut costs and boost vessel usage, the company's chief said. Maersk Tankers, which is part of Danish shipping and oil group A.P. Moller-Maersk and operates 180 tankers, also expects rivals to pursue it in a quest for larger fleet sizes and cost savings, Chief Executive Soren Skou said.

"I believe the industry will see more balance sheet consolidation in the coming years rather than more pools," Skou told Reuters in an interview. "That way we'll get the large-scale advantage on overhead costs, administration and technical issues."Commercial pools enable shippers to gain marketing clout and volume but do not give participants the same economies of scale as being a big fleet owner like Maersk.In 2008, Maersk Tankers' partner, fellow Danish shipper Torm , bought part of U.S. shipper OMI.

Maersk Tankers bought Swedish shipper Brostrom in January for 3.62 billion Swedish crowns ($473.6 million) and expects to complete the integration this year.Skou said the company may make more acquisitions."If we can demonstrate this (Brostrom acquisition) was a sensible thing to do, to shareholders and our board, I'm sure we'll go down that road again," he said.

Maersk Tankers, which controls about 7 percent of the world product tanker fleet, does not expect to cancel any of the 48 vessels it has on order and sees no need for lay-ups despite projects adding 20 percent capacity to its fleet in the next few years, Skou said.

TANKERS FARE BETTER

International shipping has been knocked hard by the global economic downturn largely due to overcapacity caused by a construction boom that took place before the slump began.But unlike container shipping -- the cornerstone of Maersk shipping, making up 15 percent of world boxship capacity -- tanker markets have suffered less despite a slump in global oil consumption.

Global shippers have placed orders equivalent to 40 percent of current world product tanker tonnage, but with 16 percent of tonnage being scrapped due to a ban on single-hull ships before 2012, overcapacity does not present the same problem to tanker shippers as bulk and container shipping.Offshore crude storage, due to higher forward crude rates versus spot rates, has absorbed 10 percent of global capacity, while an increase in refinery capacity in the Persian Gulf has underpinned transport needs.

"We're coming off the lows," Skou said, referring to a rebound in tanker rates from lows not seen since the post-9/11 economic slump."I've given up on predicting how rates move. That entirely depends on when the world economy recovers and when the wheels start running," Skou said, noting an increased need for transport in emerging markets such as China and India.Maersk Tankers 2008 sales were $1.0 billion and its pretax profit was $325 million.

Source: Reuters