Bermudian-based Frontline Ltd, one of the world’s largest oil tanker operators, is to buy ten newly built Suezmax tankers from commodities trader Trafigura Group.

Under the terms of the deal, Trafigura will get between $538 million and $547 million in cash as well as 8.48 per cent of Frontline shares worth about $128 million.

The agreement announced on Friday validates Trafigura’s 2017 decision to back a $1.55 billion order for 16 Suezmaxes and 19 oil-product tankers fitted with units known as scrubbers, which are needed to comply with new environmental regulations coming in 2020 to reduce sulphur emissions from shipping.

In addition to Frontline paying as much as $675 million in cash and shares for ten of those Suezmaxes, the tanker operator, which is backed by Norwegian billionaire John Fredriksen, has the option to buy four more of the vessels. The deal is expected to close between November and March.

“This marks a continuation of an approach that has long been integral to Trafigura’s strategy, namely investing in infrastructure assets in support of commodity flows and then collaborating with a market leader like Frontline to maintain sufficient access to those assets for our trading business,” Rasmus Bach Nielsen, Trafigura’s global head of wet freight and a driving force behind its recent moves in shipping, said in a statement.

Nielsen sees significant upside potential for the stake in Frontline due to rising US oil exports, an ageing global shipping fleet and low vessel orders.

In the past, Trafigura has used its commodity-sector knowledge and access to relatively cheap capital to invest in the construction of pipelines and ports, eventually selling stakes in those assets while maintaining access for its commodity flows. Handling about 5.5 million barrels of crude and products per day, Trafigura is the second-biggest independent oil and metals trader.

Freight rates have been rising ahead of implementation of the International Maritime Organisation’s 2020 sulphur regulations. The cost of hiring a Suezmax tanker is currently close to $13,000 per day, according to data from the Baltic Exchange. Rates have increased since the start of the month and are at their highest on a seasonal basis since 2015.

As part of the deal with Trafigura, Frontline agreed on long-term charters for all ten vessels until the deal closes at a price of about $23,000 a day. That is “loss making on current spot rates” but “fair given the outlook for the balance of the year”, analysts at Fearnley Securities AS said in a note to clients.

Over the course of this year, about 2,200 ships globally will install so-called scrubbers, allowing them to keep burning high-sulphur fuel oil once IMO 2020 comes into force. Much of the work is being crammed into the fourth quarter, threatening to drain capacity from the global fleet.

Fearnley says the deal will make Frontline the largest Suezmax operator in what it rated “a very positive transaction” for the shipping firm.

The deal will provide Trafigura with a cash boost amid pressures about its debt levels and criticism from short-seller Iceberg Research about how it values some assets.

Trafigura is highly leveraged, with adjusted net debt standing at nearly $7.6 billion at the end of March, equal to nearly 4.5 times its annual earnings before interest, tax, depreciation and amortisation in its fiscal 2018 year.

Separately, Trafigura this month struck an agreement with Frontline and another Bermudian-based company, Golden Ocean Group Ltd, a dry bulk shipping firm also backed by Fredriksen, to form a marine-fuel joint venture.