Trafigura bets tanker disruption has years to run
BREAKINGVIEWS- Trafigura bets tanker disruption has years to run The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Yawen Chen
LONDON, Oct 5 (Reuters Breakingviews) - Giant oil tankers have suddenly become a very good business. Wars and blocked sea lanes have pushed freight rates to levels miles above those seen in the past decade, and veteran commodity trader Trafigura is betting the bonanza will endure. Its majority-owned Volare Shipping VLCC.OL raised $500 million in a private placement ahead of its Oslo listing, with part of the proceeds earmarked for eight new very large crude carriers, or VLCCs. Investors are on board: the shares rose 7% on their Monday debut.
Trafigura's bet predates the Iran war. Sanctions on Russian oil had already put some tanker capacity at risk, while attacks in the Red Sea forced ships onto longer journeys around Africa. Fighting around the Strait of Hormuz then tightened things further, deterring some vessels from entering the Gulf and forcing exporters to move crude in shorter relay trips through the strait before transferring it to other ships.
It all makes adding ships look tempting. As of September 4, locking up a VLCC for five years cost nearly $59,000 a day on average across major routes, compared with the $35,600 a day per vessel Volare estimates as its breakeven cost. And since then spot rates have gone up even more - the daily hiring cost to transit from the Gulf through Hormuz to China, for example, has rocketed to over $1.2 million a day. No wonder Volare Chief Executive Alexandre Duff wants to draw on Trafigura’s trading, chartering and analytics platform to target the spot market.
Scale matters too. South Korea’s Sinokor has rapidly bulked up, and shipping-data provider Signal Ocean expects it to control at least 24% of the spot-trading supertanker fleet this year. Against that, expanding Volare to 14 ships gives Trafigura more heft.
Even so, the trader's bet carries risks. Analyst Vortexa says VLCC tonne-mile demand fell in August while the number of empty vessels available for work increased, even as Gulf freight rates stayed high because access remained constrained. Prior to 2022, Volare's one- and five-year rates lagged its breakeven costs.
While this year has decisively changed the Gulf, that geopolitical risk may yet dissipate. According to Maritime Strategies International, owners ordered 54.5 million tonnes of VLCC carrying capacity in the first half of 2026, more than in any previous full year - swelling the order book to roughly 35% of the existing fleet from 2% in 2023. Cosco Shipping Heavy Industry’s planned IPO is another sign of rapidly expanding shipbuilding capacity.
Volare values its six operating ships at about $968 million and its eight newbuilds at another $1.18 billion. Deduct roughly $770 million of lease liabilities and $730 million still to be spent on the new ships, and equity value comes to $645 million, almost exactly what the offer price implied. Jefferies in August estimated larger rival International Seaways INSW.N at 1.14 times its net asset value.
That suggests Volare's valuation may not be in the clouds. But by the time its new ships are delivered in 2028, freight rates may not be either.
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CONTEXT NEWS
Volare Shipping began trading on Euronext Growth Oslo on October 5, after raising about $500 million in a private placement priced at 154 Norwegian crowns a share.
Trafigura will retain a majority stake of about 53% if the greenshoe is fully exercised, or 56.3% otherwise, according to the company’s information document.
Volare Shipping’s shares rose over 7% to 165 crowns as of 0927 GMT on October 5.
(Editing by George Hay; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))