FYI | Dec 23 2010
Lloyd's List, source of information dedicated to the global shipping community, recently interviewed Norwegian shipping magnate John Fredriksen about the global prospects for the shipping industry. With permission from the publisher, we re-publish below the first part of this exclusive interview as published in the print magazine earlier this month.
Fredriksen warns of bleak prospects for next two years
By Richard Meade and Andrew Lansdale, LLoyd's List
OFFSHORE is hardwork but lucrative, liquefied natural gas is about to ripen and fish can provide a steady streamof income, but don’t expect to make any real money out of shipping over the next two years. At least not until the next wave of tanker consolidation kicks in, says the world’s largest tanker operator, John Fredriksen.
Speaking exclusively to Lloyd’s List in a rare interview, the billionaire maritime industrialist said he was staying away from shipping for the time being and concentrating his attention on more profitable offshore and seafood ventures. The tanker and dry bulk sectors will remain besieged by overcapacity for the next two to three years, he predicts, and only once some people have “faced the reality of what they have done over the past five years” would a process of consolidation allow some movement in the market.
“Something will break here and quite a lot of people will not be able to take delivery of ships,” said Mr Fredriksen. “It’s going to be another couple of years at least on the tanker side and a lot of ships will have changed hands by then.” However, once the market has rebalanced, the 66-year-old serial entrepreneur, who will celebrate 50 years in the business next month, has promised that he will be “back on the scene”, potentially in a big way,with significant profits from his other ventures to spend.
“If it gets cheap enough we will be there,” he said. “That’s how Frontline was started, out of a massive consolidation. We started with eight bulk carriers and ended up as the biggest tanker owner in the world within four years after doing more or less a transaction every quarter. This time round? Sure, we will try to have a go at it.”
Mr Fredriksen controls a network of companies worth in excess of $24bn, but he currently has only 15% of his money invested in pure shipping ventures. Despite being best known as a tanker owner, he points out that the label is somewhat misleading and his investments in fish farming far outweigh his interests in Frontline, the world’s largest crude oil tanker company. Offshore is where he is currently investing most of his attention and money. Having transformed Seadrill from a $200m operation to a $14bn offshore giant in under five years, Mr Fredriksen suggests there are some exciting offshore opportunities yet to come.
In the wake of the Deepwater Horizon oil spill, Seadrill last month ordered up to four ultra-deepwater drillships at Samsung Heavy Industries in deals worth well over $2bn, suggesting that Mr Fredriksen is prepared to test his faith in the ability of modern tonnage to turn a profit in a period of tightening regulatory standards.
“We are now the second biggest in the world after Transocean, but we have unique assets in the sense that we have a very modern fleet of rigs in a market where the average age is between 25-30 years,” he said. “It takes a lot of time and hard work but we are putting a lot of effort into offshore at the moment.”
But if offshore is paying out now, it is his long-term punt on LNG that could turn out to be the big winner. After close to a decade of structural overcapacity in the market, Mr Fredriksen remains convinced that his Golar LNG ventures are about to pay off. “Nobody else is looking at LNG ordering, it has been dead for years, but there is only 3%-4% left of the orderbook and we have been waiting for close to 11 years, he said. “Now it is getting ripe, we are getting close on that one.”
Speaking about who has the most influence in today’s shipping industry, Mr Fredriksen conceded that his own power to influence the market has waned over recent years as he has consolidated his interests and Asian operators have gained a foothold. “Now the Chinese have entered the market I am not sure how much influence we have at the moment,” he said. “From a business point of view the Far East is the place to be today.”
Asked if he could see a Chinese John Fredriksen emerging in the next five years, he said: “It will probably happen, but I don’t know who it will be.”
Lloyd's List recently published its updated list of 100 most influential persona in the shipping industry, see http://www.lloydslist.com/ll/news/top100/article352203.ece
