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Chartering, pool management and asset owning constitute main pillars of business

Navig8 has developed a sophisticated business model that has led many industry players to describe it as a global oil-logistics company rather than a run-of-the-mill tanker operator.

Its business is built around three main pillars along with several support activities.

The bread-and-butter activity is fixing in various types of tankers on time and bareboat charters and then fixing them out on period and spot charters or carrying contract-of-affreightment (COA) cargoes. The company is, for example, one of the major players in the Southeast Asian palm-oil trade. Its trading activity is the reason why it is so active on the weekly fixture reports.

Navig8 chief investment and financial officer Modi Mano says this modus operandi gives the company a high degree of flexibility to move in the same direction as the market.

“We benefit from market volatility. We don’t need it to move in one direction,” he said.

Navig8’s second business pillar is the management of its six pools. The company currently operates three products-tanker pools. The Handy Pool covers ships of between 35,000 dwt and 42,000 dwt, the MR Pool comprises medium-range (MR) vessels of between 44,000 dwt and 54,000 dwt and the V8 Pool aframaxes of between 95,000 dwt and 120,000 dwt. The Handy and MR pools operate under the same company, Navig8 Pool Inc, and are fully managed by Navig8. The V8 Pool is a joint venture between Navig8, VTN Shipping and JB Ugland Group.

Toward the end of last year, Navig8 set up two chemical-tanker pools under Navig8 Chemicals, a joint venture between Navig8 and Sokana. The Taras Pool covers chemical tankers of between 12,000 dwt and 15,000 dwt and the Brizo Pool vessels of between 16,000 dwt and 21,000 dwt.

Last month, TradeWinds revealed that Navig8 had set up a new VLCC pool with VTN Shipping and Muscat-based Oman Shipping. The new VL8 Pool will initially kick off early next year with three Oman Shipping newbuildings and more vessels are in the pipeline.

Industry sources say Navig8 may soon launch a further pool focussing on the long-range-one (LR1) segment — a move that would give the company full coverage of all sectors of the products-tanker market.

Mano describes the pools as an important part of the business and a big contributor to its bottom line. The number of pool participants has risen from seven to 24 with more expected to join.

The third pillar is asset owning. When Navig8 was first set up, it took ownership stakes in a number of vessels. Mano says Navig8 exited a large number of these holdings prior to the shipping collapse in late 2008 and simultaneously cut most of its newbuilding investments. It sold several products tankers under construction in South Korea and cancelled four tankers on order in Dubai.

“This put us in a very good position when the market went down and it now allows us to re-enter asset owning at much more attractive levels,” said Mano.

Although no firm figures have been set, Mano indicates that Navig8 may be willing to spend in the region of $200m on handy to aframax products tankers.

Also under consideration is a potential move into fund management of shipping investments. “We would like to get more involved with investors on the capital side,” he explained.

To support its tanker business, Navig8 from its outset set up a technical-management division, which it claims is good for quality control and allows it to do bareboat charters. It also allows the company to offer its partners a full commercial and technical-management package.

The technical-management division only services Navig8 and its partners’ requirements and is not available to outsiders on a third-party basis.

Jonathan Boonzaier, Singapore
TradeWinds, 23 April 2010

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