Over the years, hundreds of tankers were employed in the grain trades.
Gluckauf, the world's first oil tanker, had the capability to carry dry cargo.
[Photo Courtesy: Capt. James McNamara]
The first oceangoing steamer designed and built to carry oil in bulk was the Belgian-flagged Vaderland, which was built in 1872. The intended service of this vessel was to carry immigrants to the U.S. and return to Europe carrying petroleum. Prior to the first voyage, however, the authorities forbade the scheme as being too dangerous. The ship was then converted to a passenger cargo liner and never carried an oil cargo.
The first prototype of the modern tanker was the Gluckauf of 1886. There were, however, numerous sailing ships owned by oil companies at the time. Interestingly, one such sailing tanker remains, the Falls of Clyde, currently laid up in Honolulu.
Until recently, most tankers were fitted with a dry cargo hold, usually located near the forecastle, and included cargo booms for the loading and discharge of cargo. The hold averaged 15,000 cubic feet and was used for the carriage of barrels, cases and drums of lube oil or oil and chemical products.
Tankers have been known to enter the dry trades. In 1944, World War II was raging across the European continent. The agricultural regions were devastated and what little grain remained in the fields could not be harvested with the farmers serving as soldiers. Europe’s cities faced starvation. The Battle of the Atlantic had fully employed all the dry cargo ships.....MUCH MORE
Due to the urgency in Europe, a bold experiment was undertaken — bulk grain would be loaded into newly built tankers that had never been in the oil trades. It was decided that these vessels were to load at Canadian ports. The experiment became a success. These vessels did get safely across, although not much is known about their voyages.....
It worked the other way (sort of) as well. Seeing as how there is a pretty steep contango in the oil futures this next piece is doubly apropos.
That Time An Oil Tanker Named For a Stockbroker Caused the World's First Large Marine Oil Spill
February 3, 2016
Oil Tankers and Interest Rates and Scallywags and Time
Izabella is back.
We didn't see anything by her on Monday or Tuesday but yesterday she was to be found hanging out at the intersection of physical and financial.
She was looking at one aspect of time in the commodities biz, dropped a "shedload" on unsuspecting reader, and asked the question that's been on everyone's collective mind:
"where the hell has the floating contango trade been?!"However, before we join her here's the first thing that came to mind when I saw her headline, "Floating cash and carry rates, and the GO SLOW tanker phenomenon":
That ridiculous looking thing is the seven masted schooner Thomas W. Lawson, named for a guy Wikipedia describes thusly:
"A highly controversial Boston stock promoter, he is known for both his efforts to promote reforms in the stock markets and the fortune he amassed for himself through highly dubious stock manipulations...."But of course.
Though originally designed as a dry bulk--coal in this case--carrier, after just a few years the Lawson was converted for use as an oil tanker.
And boy was it slow.
As an extra bit of specialness, when it sank in 1907 it created what was probably the world's first large marine oil spill.
That's what I thought of when I saw the headline.
On to FT Alphaville:
Floating cash and carry rates, and the GO SLOW tanker phenomenon
The world is a confusing and tangled web of interconnections. One such set of interconnections relates to the cost and storage of commodities and how it feeds into the wider economy.
For years we’ve made a simple point: the return on commodities is pretty indicative of the natural rate of return. When the return on money beats the return on holding commodity inventories, commodity companies are encouraged to drawdown on inventories in a bid to turn them into higher yielding monetary holdings. All of which has two effects.
In the first instance this encourages a liquidation effect. Commodity prices fall as the market scrambles to swap oil for cash reserves. In the second instance it reduces the amount of buffer commodity stocks in the economy, because holding anything other than emergency reserves is considered a capital cost.
Essentially, when rates rise, it’s symptomatic of a market call for the distribution of previously pent up/stashed up reserves, inventories and commodities.
To the contrary, when the return on money underperforms the return on holding commodity inventories (after storage costs, depreciation, insurance and maintenance are accounted for), commodity companies are encouraged to load up on inventories at a funding expense to themselves in a bid to benefit from the higher returns that can be achieved in commodity markets. All of which also has two effects. In the first instance it encourages a purchasing effect. Commodity prices rise as the market scrambles to swap cash for oil reserves. In the second instance it increases the amount of buffer commodity stocks in the economy, at an overall economic cost to society (because it was drilled up for nothing: idle capital which now has to be maintained, secured and managed for no real reason at all.)
That’s the arbitrage.
Since 2008, commodity markets have mostly benefitted from the latter situation: appalling returns in money markets diminishing the natural costs of storing commodities and hence incentivising storage, especially at times when a guaranteed risk-free return could be had by way of futures market hedges.
But the ability to secure a risk-free hedge in a way which made this trade worthwhile began to be compromised from about 2013 onwards. Significantly, this was about the same time the market began to wake up to the shale over-abundance threat in oil and the scale of the warehouse oversupply problem in metals markets."Behind the curve"
It is our proposition that until that point the market had entirely misconstrued the degree to which money dynamics rather than demand were driving commodity prices — whilst driving commodities into dark inventory stashes — and to what degree the futures markets was behind the curve rather than ahead of it....MUCH MORE
Commodity puns at the Financial Times!
See why we can't wait for her return?
