SINGAPORE, Sept 27 (Reuters) - Glencore’s shipping unit, ST Shipping, may reduce the number of oil tankers in its fleet over the next six months because rock-bottom freight rates have cut into profit margins, a company executive said on Tuesday.
ST Shipping is looking at returning several crude oil tankers to owners when long-term contracts expire in the next few months due to negative freight rates, said company director Kent Paulli.
“(Our fleet) could very well shrink over the next three to six months,” Pauli told reporters on the sidelines of an industry conference.
“As we have time charters maturing, we are very likely to be giving ships back unless we see deals that make sense.”
He declined to specify how many crude oil vessels, also known as dirty tankers, could be cut.
“I’m not going to say that we will definitely re-deliver 50 ships (to their owners). We will have to see how the market plays out,” Paulli said.
The majority of ST Shipping’s fleet are clean tankers, which transport diesel, naphtha and other fuel products, while a smaller portion is comprised of dirty tankers.
ST Shipping is expected to receive three Long Range 1 tankers, which typically carry 55,000-tonne loads, from Korean shipyards in the next three months and does not plan on ordering more vessels in the near term.
Crude oil tanker earnings on the benchmark Middle East route have stayed in negative territory for most of the past two months, trading at -$1,826 a day on Monday.
In other words, ship owners are paying $1,826 more a day in bunker fuel and other variable voyage costs than they received from companies using their very large crude carriers (VLCCs) to ship crude oil from the Middle East to Japan. (Reporting by Randy Fabi and Harry Suhartono;Editing by Clarence Fernandez)