Buy, buy baby

Owners who heeded Morten Arntzen's positive Posidonia message of 2012 are a collection $4.12bn in the black. Andy Pierce analyses the figures

Morten Arntzen cut a positive figure the last time the shipping world assembled for Posidonia. Speaking in a country straining under the double weight of a shipping and national debt crisis, the tall American predicted that owners were sitting on the best opportunity they had seen since the mid-1980s.

“Fortunes will be made,” the then chief executive of Overseas Shipholding Group (OSG) declared, four years into the deepest industry recession in a generation.

Although owners were not quite crying into their champagne two years ago, such a positive outlook was greeted with scepticism, Arntzen remembers. It’s easy to see why. Fellow Wall Street shipowners, including Evangelos Marinakis and Angeliki Frangou, were also talking of exploiting opportunities, but Clarksons Research president Martin Stopford was in the same room forecasting “a decade of difficulty ahead”.

“Not to sound too graphic, but in shipping when there is blood in the streets, it’s always a good time to invest. That was certainly the case in 2012,” Arntzen recalls today.

“It’s frightening to be generating operating losses. Most of the equity in shipping had been wiped out between 2008 and 2012. It was really an awful time for shipyards and freight rates. But anybody who steps up then does well. It’s the contrary story of shipping.”

For Arntzen’s OSG, the freight markets ultimately proved too bloody. Just six months after the curtain came down on Posidonia 2012, one of shipping’s iconic names became arguably the most high-profile casualty of the crisis.

Others were left to reap the rewards of this golden opportunity amid the gloom. Between June 2012 and April this year, shipowners have invested $25.46bn in the secondhand market, in deals that have so far been profitable. Those brave enough to take their cash out of the bank and put it into steel have been rewarded with a combined paper and trading profit of $4.12bn, data provided by shows.

That figure is a fraction more than the world’s leading hedge fund manager, George Soros, generated in 2013, according to Forbes magazine.

Greek owners are sitting on around half of the gains. Their collective investment in 583 vessels is $2.08bn in credit today. This is comfortably ahead of second-placed Chinese owners ($612m), Singapore ($403.5m) and the US ($340.6m).

But it is not a Greek owner at the top of the overall standings, at least in dollar terms. Despite their heavy investment, only one Hellenic owner is among the top five most profitable global asset players of the past two years, where fortune is smiling on the biggest spenders.

“Buying in bulk has resulted in companies making the most profit,” says Richard Rivlin, chief executive of, which provided the data at the request of TW+. More specifically, buying fleets from AP Moller-Maersk has been the recipe for the most successful.

Heading the list of profitable secondhand market plays is Euronav, thanks exclusively to its swoop for a 15-strong VLCC fleet from Maersk Tankers. The $980m deal, pieced together by Euronav chairman Marc Saverys and his team in just 18 days, has so far returned a paper profit of $107.8m. In simple terms, the fleet has risen in value by a little over $1m a day between when the takeover was announced and the cut-off for this survey on 1 April.

Euronav completed the quick-fire deal in January after winning the race for a fleet that had been coveted by General Maritime for months. At the time of signing the cheque, Euronav had spent 13 successive quarters in the red and was about to extend that run to 14. In 2012 and 2013 its total net loss reached almost $210m.

“You have got to give [Genmar chairman] Peter Georgiopoulos a lot of credit,” says Arntzen. “When he started talking to the private equity investors needed to buy the Maersk fleet, that was the worst summer in 40 years for the big tanker market. Euronav too deserve credit for making a play at a bad time.”

Silver medal in the secondhand standings is also claimed by a big-name owner who bought a fleet from Maersk in a sector that has since come to life. Andreas Sohmen-Pao’s BW LPG has seen its $403m investment in seven vessels — including five from Maersk — rise in value by $88.5m since making its move last year. The Maersk quintet have appreciated by almost $50m since joining BW.

Perhaps the biggest surprise is Nisshin Shipping, which slipped under the radar to claim third position. Its $277.3m investment in 12 bulkers has recorded a 30% return. “Nisshin was surprisingly aggressive,” Rivlin says. “It started buying Chinese-built tonnage earlier, before other companies, and has now reaped the reward.”

Rival bulker owner John Fredriksen’s Golden Ocean claims fourth position. Since re-opening its chequebook in early 2013, Oslo-listed Golden Ocean has spent $440.5m in the secondhand market, according to VesselsValue. These staggered investments are $79.3m in credit today.

Theodore Veniamis will have bragging rights among the Greeks assembled at Posidonia this year, with his Golden Union claiming fifth position. His $239.9m investment in seven capesize and panamax bulkers since the last event is up $77m today, and his 32% return is the highest in the top five.

Petros Pappas’ Oceanbulk (up $74.9m) and Frangou’s tanker arm, Navios Maritime Acquisition ($67.5m in credit, thanks largely to four VLCC purchases), are the other Greek owners in the top 10.

Among the other clever buyers catching the eye is Rizhao Steel. Rivlin says the Chinese firm made about $24m on each of the three capesizes it bought in January 2013 directly from Hyundai Heavy Industries, registering a huge 45% upturn in value on its only move.

The fortunes Arntzen predicted in the Athens sunshine two years ago are being amassed by those playing the secondhand market. Even larger sums, however, are growing on the balance sheets of those that have ordered newbuildings.


The companies most in credit on their orders over the past two years were in their infancy, or had yet to be created, the last time owners swapped stories and business cards at Posidonia.

Fredriksen, who topped the TradeWinds Power 2012 list published to coincide with the last event, requires no introduction. However, two years ago, his plans for the Frontline 2012 vehicle had been unveiled only a few days earlier. Its inaugural $578m newbuilding move, announced in late May 2012, was the start of a campaign that would see the company (backed in part by Fredriksen’s oil money from Seadrill) become his largest shipping venture to date.

Frontline 2012 has since spent $1.92bn on products tankers, VLGCs and most notably capesize bulkers — ships that are $414.7m in profit today, according to VesselsValue.

That is more than $100m ahead of the market capitalisation of Frontline, the company Frontline 2012 was initially created to rescue, and Fredriksen has begun to cash in on some of that promise via VLGC and capesize sales to other companies in his empire.

Oldendorff claims second spot in what might have been expected to be a straight fight for the top two places between Frontline 2012 and Scorpio Tankers.

The privately owned German company is $347.5m up on its near-$2bn newbuilding programme, which has taken its fleet to record levels, edging Wall Street favourite Scorpio Tankers into third position.

Last Posidonia, Scorpio had only nine of the eco-products tankers for which it is best known on order, but has since invested $3.76bn on newbuildings. The data suggests it is $284.4m in credit on those deals.

Like Frontline, Scorpio Tankers has already begun to turn paper promise into hard cash. It has confirmed a $51m gain in just four months on seven VLCC newbuildings, which were snapped up by Georgiopoulos to soften the blow of his Maersk disappointment.

Tim Huxley, a former Clarksons broker who jumped the fence to lead owner Wah Kwong, describes the Scorpio VLCC sale as the “best asset play in recent times”. He adds: “The key to whether it is a good deal or not is how much money you make when you sell it.”

Had Scorpio Tankers had the same seven VLCCs debt-free trading on the spot market since the last Posidonia, the vessels would have generated a mere $34.5m, according to data compiled for TW+ by Erik Nikolai Stavseth of Arctic Securities.

Scorpio Bulkers, which was formed last summer on the back of the success of Scorpio Tankers, is only three places behind its sibling. It boasts a $159.7m gain on its near $2bn newbuilding drive.

Sinokor and China Merchant Energy Shipping, at $273.9m and $161.4m in credit respectively, are the meat in the Scorpio sandwich.

Another big-spending newcomer putting in a strong showing is Navig8, which broke into shipowning last year with the aid of capital markets and private equity. It is already looking like a risk worth taking for Nicolas Busch and his team. The pool manager turned owner has potential profits of $148m in shipyards across its products, crude and chemical tanker investments.

Oslo over-the-counter (OTC) listed Navig8 Product Tankers is the group’s leading performer, with a $70.5m uptick on its $1.14bn orderbook. Based on Stavseth’s calculations, it would have needed 15 debt-free MRs to be trading over the past two years to generate the same income. Navig8’s chemical joint venture with Oaktree Capital is $52m up, while its second OTC company, Navig8 Crude Tankers, has a $27.2m gain on its $940m VLCC newbuilding programme.

Dorian LPG’s John Hadjipateras is the leading Greek among the top global newbuilding investors, having tapped the OTC market last summer to support VLGC contracts. He recorded a $90.6m profit from his orderbook at a time when the VLGC spot market is at record highs.

Eletson Gas, a joint venture between Costis Kertsikoff and Blackstone, is also sitting on more than $80m, as is Pappas with Oceanbulk, a US IPO hopeful.

Arntzen feels the first part of his forecast has come true. However, he is not yet ready to hand out medals, as the fortunes he predicted are not locked away in the safe.

“In 35 years in shipping the only company I have seen order on the scale of Scorpio, Frontline 2012 and Navig8 was Sanko in the early 1980s. Nothing on that scale had been done before or since, until now,” he says.

“Until ships run on water, nothing is certain. There is still a whole lot of work which needs to be done. Those who have raised capital, for their business plan to be a success, now they have to execute: Frontline 2012, Scorpio, Navig8. All of them.

“Never underestimate the capacity of the global shipbuilding industry. I went to DSME at the height of the last tanker boom and they were building an aframax tanker in the middle of a soccer field.”

Looking to return to shipowning after completing his OSG gardening leave, Arntzen believes money can still be made by entering the arena now. He sees opportunities, despite increased asset prices and freight rates in most key markets still being, in his words, far from exciting. Indeed, the Clarksea Index for global freight rates stood at $11,553 at the end of March this year — only $100 more than in June 2012 and way below its 2008 peak of $50,000.

“A $104m VL will not bring you as much pleasure as a $94m tanker,” Arntzen says as a buyer, although he adds: “The shipping and energy worlds always seem to defy the forecasts of even the smartest people. There is still opportunity.”

However, those who believe Arntzen got his positive Posidonia forecast right last time may want to look at investing in shares as well as steel because, he says, stock markets have still not embraced shipping again after the financial crisis.

“The interest will only return when companies are making very big profits and generating significant cash,” he says. “Then you will see a very big increase in equities and people will make a lot of money.”