Tanker Mergers and Handicapping Horses

Well, last week I was enthused about the Kentucky Derby horse-race, and was trumpeting my choice of “Tawny Port” (I know it’s a wine and not a maritime port, though the name does come from a place where vessels used to load up with their liquid cargoes in barrels, back in the day). By race time, “Tawny Port” was rated at 80 to 1. Amazingly, “Rich Strike”, the actual winner of the Derby- and a last minute substitute for some other horse that had been scratched, was also quoted with 80 to 1 odds. I guess you could say that I was backing the wrong horse- using a familiar cliché. One TV announcer said: “With the Derby, you just never know.” One might say the same thing about shipping equities.

Tankers are now a big thing- though demand recovery was already happening, the big impetus was the onset of hostilities in the Ukraine. I am leaving the odds-making to others, but it’s well known that trades in natural gas, oil and refined products are already shifting. It’s worth re-stating, even if the quantity of barrels (hydrocarbons, not grapes) or gallons moved declines, the longer distances and just the disruption of getting vessels into place for the next voyages often adds some supply/demand tightness.

By the way, news reports are now picking up vibes that the surge in the rates for carrying containers may ease- one of the largest listed carriers has said as much in recent earnings releases. There have also been rumblings that trucking delays have reduced- with other analysts suggesting that more drivers have been hired. And then we have the trope about folks buying less because they are not stuck at home. Of course- with $5/gallon petrol, folks may opt to stay home again.

In tankers, merger dramas are being played out in Oslo, Antwerp and New York. One intriguing theory on this whole tanker mashup (what else to call it? a triangle, maybe?)  in progress now is that a tri-fecta winner could emerge, with the three tanker giants coming together. I have no idea what the chances of this are- but I am putting it out there for readers. A listed tanker company with a market cap of circa $5 billion (with 230+ vessels and flashes of “concentration” in the aggregate fleet lists of VLCCs and Suezmaxes)- now that’s something to ponder. So first, the Oslo and Antwerp axis will need to come together first- the Belgian target company’s shareholding meeting is scheduled for next week; the target’s Board has recommended taking the merger route, but an influential and entrenched group of shareholders have a different vision, driven by ESG, of their tanker company. Then there is the Oslo and New York axis; for now, the legal boffins on the target side have put measures in place that will hold the invaders at bay. But my hunch is that the next moves will depend on what happens in Antwerp. Sort of like handicapping horses. Right?

Peering into the future, it would seem that tanker owners, generally, might be moving around non-fossil fuels, or- if some owners’ ambitions and hunches prove correct, maybe the products of carbon capture. Clearly, this is on the mind of the Antwerp based entity. Indeed, this is the first time that ESG (albeit- the “E” part, in a big way) is playing an outsized role in a shipping take-over battle.

And, yes, readers, the Preakness- the second of the three “Triple Crown” races, is coming up in a week or so. That’s a few days after the big Annual General Meeting in Antwerp. There are rumblings that “Rich Strike” will not be competing. As they say in Kentucky (a state that is actually big in U.S. inland waterway transportation- but non-U.S. readers may not be familiar with it), “…you just never know.”