Safe Bulkers chief speaks out on converted VLOCs

Polys Hajioannou says older VLOCs converted from VLCCs 'should not have been in the market in the first place'.

Polys Hajioannou expressed criticism Friday of the continued use of very large ore carriers that were converted from elderly large tankers.

The Safe Bulkers chief executive told analysts that the 266,000-dwt Stellar Daisy (built 1993), which sank in March after breaking in two off Uruguay, was too old to be in service, particularly since the former VLCC was originally built for another purpose.

But he said the problems facing the vessels will spur Polaris to phase out the vessels even before Valemax replacements hit the water in 2019 and 2020.

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"This is only positive for the market, and it's could for safety in general," said Hajioannou, whose Athens-based company owns bulkers ranging in size from panamax to capesize.

The Greek shipping executive's comments come amid continued scrutiny of the fleet of South Korean bulker owner Polaris Shipping, which has encountered problems on its ships since the Stellar Daisy sank in March after breaking in two off Uruguay.

TradeWinds reported yesterday that Polaris has denied rumours that iron ore giant Vale has stopped using the vessels after cracks were found in the deck plating of the 305,000-dwt Stellar Queen (built 1995).

"I think they shouldn't have been in the market in the first place," Hajioannou said after New York-listed Safe reported earnings.

Hajioannou said converted vessels always encounter problems, though good management can deal with those problems.

An executive at Polaris Shipping's Brazil office could not be reached for comment for this story.

Staying away from newbuilds

Meanwhile, Hajioannou says he believes his company will avoid newbuilding orders in 2017 and 2018.

He says public shipowners should not rush into newbuildings when the market returns to a healthy position, hopefully in 2018, because they should focus on recovering the previous years' losses first.

"We strongly believe that newbuildings should be added in the fleet only if they are at a responsible pace and when these ships are really required," Hajioannou said in the earnings briefing.

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"At this moment the newbuilding ships are not required because the market is not yet at a healthy position."

He did not rule out purchases of second-hand vessels.

Safe Bulkers, which typically adds to its fleet through orders at Japanese yards, is in a position to grow.

Stifel analyst Benjamin Nolan said the company could buy several second-hand vessels without harming its finances. 

"However, overall market demand remains uncertain and newbuild activity is up 74% year-over-year, potentially limiting the impact of a stronger market in 2018," he said. "We expect management to remain patient and only opportunistically seek out acquisitions."