All Posts By

Mette Frederiksen

Atlantic Crude Flows Drive Change in VLCC Tradelanes

The Atlantic basin has not traditionally been a place where VLCCs pick up crude cargoes destined for Europe. These relatively short haul routes load in North and South America, West Africa and the Mediterranean for discharge in Northern Europe and are usually serviced by smaller oil tankers. This year we have seen VLCCs increasingly competing for this business resulting in a change to trade patterns for the segment. There are a number of factors that help to explain this situation.

Firstly, oil flows from Atlantic basin producers to Europe has increased. Crude flow data from KPLER clearly shows an increase this year, especially as we move into the second quarter. This of course is on the back of reduced crude flows into Europe from Russia. If we overlay this with Tankers International fixture data we note a sharp rise in VLCC liftings over the same period. In the second quarter of this year, we have counted an average of 13 inter-Atlantic VLCC liftings per month compared to historic figures of just 1-3 monthly liftings.

However, the increase in crude flows does not fully explain what has happened here, as this could have simply translated into a boom in the Suezmax and Aframax segments. This did occur to some extent. As Europe began to replace Russian crude with similar grades from suppliers in the Atlantic basin, freight rates for the smaller tankers spiked as demand went up. A relatively weak VLCC freight market meant that this segment became more competitive, even on these shorter routes, and VLCC fixing activity started to take off.

One question that arises is whether this represents a fundamental change to VLCC trade patterns going forward. The answer to this is not straightforward. If the crude flows into Europe from Atlantic basin suppliers remain at elevated levels, they will certainly provide a baseline for keeping a certain level of localised VLCC activity within the region. The swing factor is likely to be freight markets and the correlation between Suezmax and VLCC freight. Charterers will consider all options and, all other things being equal, choose the cheaper vessel.

Editorial – How Pooling Can Facilitate Shipping’s Sustainability Revolution

Editorial published in Marine Log 22 July 2022

Shipping’s role in the global supply chain is increasingly under the spotlight when it comes to ESG. Today, most large energy companies have formal environmental targets. Many of these targets are notable for their ambition, or the way that they underpin new branding and strategy. Most of these companies are already reporting their emissions to the public, to shareholders, and to regulators—and these targets and reports are now focusing on every aspect of the supply chain.

This is highly symbolic of the industry’s new decarbonization dynamic. Environmental issues are increasingly driving commercial decisions for cargo owners and their customers, which in turn means that the efficiency and emissions credentials of shipping represents tangible value for charterers and their stakeholders. Increasing demand-side pressure is neatly coinciding with a growing focus from regulators. The shipping industry faces a series of landmark regulations over the next few years, with every indication suggesting that there is more regulation to come.

Sadly, this dynamic is creating significant challenges for shipowners. At a fundamental level, zero-carbon ship technology and investments are still in their infancy and the sector is not going to be able to go green overnight—even if many of our stakeholders need green options today. This is where Tankers International’s VLCC pooling model is uniquely placed to help shipowners, charterers, and the wider industry today.

Meeting the regulatory challenge

The Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations will be shipping’s first global decarbonization rules when they enter into force on January 1 next year. Targeting a vessel’s design and measuring and benchmarking its carbon efficiency in operation, these rules will have a radical impact.

Ships that are not able to demonstrate EEXI or CII credentials may be restricted in their trading options. At the same time, they provide easily comparable benchmarked indicators for charterers—and thus make it easier to make decisions based on climate impact.

The dramatic potential impact of these regulations is making carbon efficiency a priority for even the most resistant shipowners. Yet, even the most progressive may find compliance a challenge.

Continual measurement and benchmarking will invariably occupy a shipowner’s operational resources, while planning for vessel efficiency improvements can in itself take up resource. For many, EEXI and CII rules will also require costly specialist software and new analysis techniques that cannot be learned overnight.

Shipping’s regulatory journey toward decarbonization is just beginning, and future rules will add more complex challenges. For example, the EU is now expected to add shipping to the EU Emissions Trading Scheme with the proposed legislation recently passing several hurdles. By explicitly tying carbon to costs, and by requiring the purchase of credits based on solid data, these rules will create even wider-reaching obligations.

Maximizing resource and sharing knowledge

The Tankers International Pooling model frees up operational resource for a shipowner. As a pool we will take over a significant amount of day-to-day commercial and operational responsibilities surrounding a vessel, which would otherwise need to be handled by an in-house team. With pooling, these staff can be redeployed as appropriate to focus on strategic priorities.

As new environmental regulations are creating more complex obligations for shipowners, the operational benefit of pooling will only increase. For example, the Tankers International VLCC Pool will assist participating shipowners in calculating and monitoring efficiency to help optimize ships for CII rules and will support in meeting future EU Emissions Trading Scheme requirements.

Cash-flow is another pivotal advantage, especially in the context of meeting ambitious environmental goals. High environmental standards represent clear value for charterers and will represent a growing premium for the highest rated VLCCs, yet landmark technology investments are naturally capital expenditure intensive.

Our model combats this challenge by providing shipowners with a regular and scheduled income, through revenue sharing between vessels. We provide transparent and equitable insights into how the revenue-sharing works with all our pool participants. This is based on zero-commission, no hidden fees or unexpected costs, leaving them with a clear understanding of their financial position.

Improving cash flow also boosts total earnings, allowing a vessel to take advantage of longer voyages that often represent better freight rates. As an example, bunkers must be purchased by the shipowner before the vessel embarks on a voyage, and freight is only paid after the voyage is completed. This leaves the owner with poor cash flow and can limit a tanker’s income potential. Our pool will leverage its scale and financial strength to take care of these expenses and maximize total earnings.

Participants can also benefit from enhanced technical support and information sharing that can help owners to identify and optimize any investments required to adhere to environmental regulation. For example, Tankers International offers regular technical forums to give insights on new technologies, which helps shape purchasing decisions and best practice.

Although charterers are seeking green solutions zero-carbon shipping will take time. In the meantime climate compensation can offer an immediate solution.

Tankers International’s Climate Compensation Voyage Programme was recently launched in partnership with specialists Vertree. The scheme uses scientifically recognized methodologies and proprietary data to calculate a specific VLCC’s emissions on a voyage, monthly, or per year basis. Charterers are then provided with the option to compensate their carbon emissions via a range of nature-based and community led solutions.

Climate compensation alone will not solve shipping’s decarbonization problems, however it can play an immediate and meaningful role in giving charterers the green tools they need to succeed today.

Decarbonization is set to be an era-defining issue for the entire shipping industry. Shipowners will need to dedicate huge operational, technical, and financial resources to meet the challenge—and many will see their bandwidth and cash-flow stretched to breaking point. It is critical that tanker owners maximize the support that is available to them as the pressure to deliver results intensifies. Pools are crucial tools that can help drive shipping’s sustainability revolution.

By Matthew Smith, Senior Vice President Commercial and Operations at Tankers International

Tankers International enhances its VLCC Fixture app for faster, live updates to help keep pace with current market

New subscription plans will unlock new levels of bankable data, functionality, and analysis.

Tankers International, the world’s leading shipping pool for VLCCs, today announced an update, including a new subscription scheme, for its popular VLCC Fixture app.

This new subscription structure will provide even better functionality for app users and support market stakeholders in understanding current developments for the global VLCC fleet.
First launched in 2014, the Tankers International VLCC Fixture app is the only publicly available source of comprehensive fixture data for the global VLCC fleet and provides wider market access to data that was once only provided to a select few brokers. The app has received over 259,000 visits a month since it was re-launched in December 2021

Paid app subscribers will benefit from faster data updates and a suite of additional insights. Subscribers to the PLUS tier will benefit from additional information on bunker prices, fixing rates, laycan, demurrage, and commissions as well as a full breakdown of TCE calculations. PRO tier subscribers will additionally benefit from cargo forecasts as well as WhatsApp notifications. Users will also have an option to receive fixture data via an API feed to integrate into their own systems.

These improved features will allow users to integrate even more quality data and analysis into negotiations and strategic decision making, helping the VLCC market make better decisions that improve profit margins for app users and their stakeholders. The app’s BASIC tier will remain free and will continue to provide headline data on VLCC fixtures, but with some delay.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “We recognise that the current market climate means that shipowners, charterers and brokers alike all need quality data, faster to support decision making. The new subscription options for our VLCC Fixture app have been designed to add even greater value and accessibility, including WhatsApp updates for top tier subscribers. By introducing these updates, we are both improving the app for users and, just as importantly, safeguarding the continued development of the app, helping us add even more functionality in the future.”

The newly launched version of the Tankers International VLCC fixtures App can be downloaded as an ‘in-browser’ app here.

Editorial – Tanker Pooling is a Crucial Tool for Decarbonisation

Editorial published in Splash 247 on 19 April 2022

Matthew Smith from Tankers International makes the green case for clubbing together.

As consumers and financiers have better understood the pervasive nature of emissions, measuring, monitoring and ultimately reducing the carbon footprint of every step in the supply chain has become “table stakes” for end-users of oil and public stakeholders who drive regulators.

Virtually every large company connected to the energy industry today has an environmental policy that covers emissions throughout their logistics chain. The supermajors and national oil companies especially have implemented ambitious policies, and emissions are now a real factor in their chartering decisions.

This has radically changed shipping’s decarbonisation dynamic. The most visible sign of this shift is increased regulation, as the industry faces a series of incoming new landmark rules. However, this is coupled with a dramatic change in customer demand – whereby demand-side pressure for lower carbon solution is creating a real commercial advantage for those who go beyond minimum standards.

Yet fundamentally, zero-carbon ship technology and investments are still in their infancy and cannot be implemented overnight. This creates uncertainty for shipowners, and a difficult challenge in planning for installing new technology, as well as a challenge for charterers in search of climate conscious options today. It is critically important that the industry gets the support it needs; Tankers International’s pooling model is uniquely placed to play this role.

The decarbonisation dynamic

Shipping’s first major global decarbonisation regulations are set to enter into force on the first of January next year. The Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations will target a vessel’s design and measure its operational efficiency next to set standards.

If a vessel is not able to demonstrate its EEXI or CII credentials, it may be restricted in trading options. This is making carbon efficiency a priority for even the most resistant shipowners and will make it easier for charterers to benchmark the carbon intensity of any voyage.

Complying with decarbonisation rules will inevitably take up operational resources from shipowners. EEXI and CII rules will require constant tracking and, for many, specialist software.

The EU is expected to implement even more robust rules soon, with plans to add shipping to the EU Emissions Trading Scheme currently progressing. Those plans would explicitly tie carbon to costs and impact operational resources. These rules will aid shipping’s transition to net-zero, and could arguably create even wider-reaching obligations.

Pooling as an enabler

The pooling model supports shipowners by moving most of these operational obligations away from the shipowner to the pool operator. For example, the Tankers International VLCC Pool will assist participating shipowners in calculating and monitoring efficiency to help optimise ships for CII rules and will support in meeting EU Emissions Trading Scheme requirements.

Clearly, meeting environmental goals will pose cash flow challenges – especially when targeting above the minimum ambition. Pooling with Tankers International provides shipowners with the ability to better optimise voyage selection as they are less constrained by cash flow. Vessels operating in a pool can more easily take advantage of longer voyages that often represent better freight rates.

An owner outside of a pool will receive income only when a vessel has discharged, leaving them to cover expenses for bunkers and port calls in advance. A pool will take care of these expenses, while ensuring consistent cash flow to the shipowner through revenue sharing between all the pool vessels.

This regular income can make it easier to plan for investment-heavy emissions reduction technologies, while increasing earnings. At Tankers International we provide technical support and encourage inter-owner knowledge sharing by offering regular technical forums to give insights on new technologies – and help shape purchasing decisions and best practice.

Yet, pooling can benefit the industry beyond shipowners. Charterers are looking for green solutions today, while work on zero-carbon shipping will take time. Climate compensation can offer an immediate solution.

Tankers International’s Climate Compensation Voyage Scheme was recently launched in partnership with Vertree – a subsidiary of longstanding pool partner Hartree. The scheme allows us to offer tailored, voyage specific climate compensation packages alongside normal quotes.

The scheme uses scientifically recognised methodologies and proprietary data to calculate an emissions baseline on a per voyage, monthly or annual basis. This allows charterers to choose from a range of nature-based options to offset the carbon, tailored to price, geographies and impact targets. Where climate compensation is not a total solution to climate change on its own, it can play an immediate and meaningful contribution.

The scale of the decarbonisation challenge is set to stretch many shipowners’ bandwidth and cash flow close to breaking point, while many parts of the industry are already facing pressure to deliver. It is critical that tanker owners maximise the support that is available to them – from technical, to practical, to cash flow – and that charterers are provided with more options. Pools are crucial tools that can help drive solutions today.

Editorial – Tanker Pooling can ease Environmental Reporting

Environmental regulations and demand-side pressures from end-users of oil have created new challenges for VLCC owners and charterers. Owners are faced with new administrative and technical requirements, while charterers need new carbon mitigating options today.

Matthew Smith, our senior vice president commercial and operations, recently wrote an editorial for Tanker Operator about how pooling can help the sector to manage this transition towards zero carbon for Tanker Operator.

Read the full article on page 19 of the May 2022 edition: