"An organization controls one third of the world's supertankers."

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An unprecedented oil tanker acquisition campaign is shaking up the global oil shipping market.

On February 16, according to Bloomberg citing several senior industry insiders, South Korea’s Sinokor Group has rapidly purchased or leased a large number of vessels over the past month or two, currently controlling about 120 Very Large Crude Carriers (VLCCs). Some market veterans say the scale of this fleet is unprecedented in their careers.

Even more notable, behind this Seoul-based shipping company stands a global shipping giant. According to Bloomberg, at least two major ship owners discovered during vessel sale negotiations with Sinokor that the ultimate buyer is actually an entity related to Gianluigi Aponte, the billionaire who founded the massive Mediterranean Shipping Company (MSC) among other ventures. It is still unclear what the exact relationship is between the two companies or how many of Sinokor’s deals involve MSC.

This aggressive acquisition has thrown the market into panic. Nervous charterers are scrambling to book capacity to prevent further price surges, and freight rates have soared. According to Clarkson Research Services, crude oil tanker earnings have seen the strongest start to a year in over 30 years.

The market turmoil has also spilled over into physical oil prices. Traders say that spot crude prices in some regions have been suppressed due to chaos in the shipping market. SFL Corp. CEO Ole Hjertaker said in an analyst call last week:

“In reality, one party or a group of collaborators now controls about one-third of the available or trading VLCC fleet.”

Unprecedented Market Concentration

The tanker market is a niche but vital link in global oil trade, long dominated by shipowners from maritime powers like Greece and Norway, as well as oil-rich nations like Saudi Arabia. Although Sinokor is a relatively obscure company rooted in container shipping and has previously engaged in operations to tighten the market, at least one market participant says the current trading frenzy far exceeds any of its past actions.

The scale of this acquisition is hard to measure precisely, since it includes purchased, chartered, and ships previously controlled by Sinokor. Some market sources estimate the group controls fewer than 120 vessels. However, DHT Holdings CEO Svein Moxnes Harfjeld described it in an investor call as a “fundamental shift” in global fleet ownership consolidation. He pointed out:

“We can be sure this is happening and it’s already making an impact. Whether it’s spot market freight rates, customers’ demand for time charters, or the value of second-hand VLCCs—this consolidation is changing pricing dynamics and pressuring timely vessel availability.”

Soaring Freight Rates Push Up Costs

This wave of acquisitions has already created a storm in freight rates. Benchmark earnings for VLCCs able to carry 2 million barrels of oil have now broken above $120,000 per day, rising more than fourfold in the past month, with some market participants bluntly attributing part of the surge to Sinokor’s transactions.

The acquisitions are concentrated in vessels aged 10 years and older, with resale prices for such vessels continuously rising in recent weeks, in turn pushing up the cost of long-term charters. Shipowners are cashing in on asset appreciation by raising rents.

Broader supply and demand dynamics are also fueling the surge. In recent months, demand for non-sanctioned tankers has spiked, as global oil supplies pour in and a significant portion of the fleet is restricted by Western sanctions. Both factors have propelled effective fleet utilization higher, boosting spot earnings and laying the groundwork for further price spikes.

Strategic Moves by Shipping Titans

For billionaire Gianluigi Aponte, this acquisition is just another step in expanding his global shipping empire. Last year, he became a key investor in a consortium seeking to acquire substantial stakes in two ports along the Panama Canal. In 2022, after acquiring hundreds of ships, Aponte’s Mediterranean Shipping Company surpassed Maersk to become the world’s largest container shipping company, breaking Maersk’s decades-long industry dominance.

Although the specific arrangements between Sinokor and Aponte remain unclear, there have been commercial interactions between the two. According to Clarkson Research, Sinokor sold a series of container ships to MSC at the end of last year. Even at the lowest estimate, this acquisition frenzy has cost about $1.5 billion, and some market participants believe the total is close to $3 billion.

Shipping is known for its boom-and-bust cycles, with high-earning periods typically triggering a flood of new ship orders that hit the market years later. The recent surge in rates has already begun to spur more tanker orders; Clarkson Research data shows orders as a percentage of the current fleet are at their highest in a decade.

Okeanis Eco Tankers CEO Aristidis Alafouzos said:

“This unprecedented market consolidation, carried out by a well-capitalized buyer, is occurring just as market fundamentals continue to tighten. If you have tankers today and the commercial ability to capture this market, all this creates a fantastic opportunity.”

Risk Disclaimer and Limitation of Liability ClauseThe market carries risks, and investment should be approached cautiously. This article does not constitute personal investment advice, nor does it take into account the individual investment goals, financial situations, or needs of specific users. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. Investing based on this article is at your own risk. ```