Oil & Product Tankers Show Signs of Strain

Lately there has been news about bamkrupties because it has been at least 4 years since the crisis as worse as the great depression has collapsed the economy. since then there has been no sign of recovery for tanker market. Oil tanker market has been the worst hit as we have seen the big boys succumb to market pressures and stain in the industry.


Oil tanker company General Maritime Corp filed for bankruptcy protection and Denmark's Torm said it was in talks with creditors on Thursday as both fell victim to a glut of ships in the world fleet and gathering global economic gloom. Torm's biggest problem is a huge debt, piled up from paying out quite high dividends in the years when things went well -- 2004 to 2007," Sydbank equity analyst Jacob Pedersen said. In June, the company said it had agreed an amendment of its $900 million revolving credit facility with Danske Bank , BNP Paribas, HSH Nordbank AG and SEB. That deal postponed most of a repayment of $630 million due in 2013 to 2015 on condition that it raise $100 million in new capital from shareholders by mid-December. If the debt extension is not carried out as agreed in June, payments of $510 million due in 2015 and $60 million due in 2014 would fall due in 2013 instead.


Bankers expect more bankruptcies and restructuring in the sector as companies struggle with a worsening world economic crisis and lower earnings driven by a build-up of ships ordered when times were good. In a related sign of sector stress, a second major Chinese shipping firm has halted payments to foreign ship owners because of the downturn in the freight market. General Maritime, a leading crude oil tanker company, elected to file for Chapter 11 bankruptcy with a New York court as part of a restructuring agreement that includes a $175 million equity investment from Oaktree Capital management and extensions on debt repayments.


Despite such a gloom, we have seen the results of chemical tanker players (a niche market in the tanker industry) continue to be resilient as the market expect a recovery next year and there has been sign of recovery. Take for example the results of Stolt Nielsen, Odfjell and to some extent Berlian Laju Tanker have seen the strength of chemical business by showing relatively strong results. market has predicted the recovery in chemical tanker business within 3-12 months down the road given the level of supply being subdued given the limited orders in 2009 and the cancellations coupled with scrapping of chemical tankers.

Hope this gives a sign of hope for chemical business.

SS