DHT: Tanker Market Hit from Both Sides

2018 is not likely to bring much relief for tanker owners as both supply and demand continue to exert pressure on earnings.

“We are currently being hit from both sides,” Trygve Munthe, Co-CEO of DHT Holdings, said in a conference call on Tuesday.

“Demand for tanker transportation is hit by inventory drawdowns and on the supply side we are hit by deliveries of newbuildings exceeding retirements of older ships.”

As explained by Munthe, the main headache in the near-term continues to be the oil inventory cycle, mainly driven by OPEC cuts.

“But the good news is that we’re making meaningful progress towards the alleged goal of getting inventories back to five years historic averages. It has certainly been a tough period for tanker owners and we eye an end into the inventory drawdown phase in the not too distant future.”

The global demand for oil is robust and growing, Munthe added, noting that the main engines of growth are China, India, and Southeast Asia.

“Further, the increased export of U.S crude is becoming an important factor in the tanker market.”

On the supply side, there are some signs of encouragement, as more VLCCs are being sent to scrap yards. Just in January this year five VLCCs were sent for demolition.

In addition, the number of likely candidates which are turning 20 in the next couple of years will reach 37 in 2020.

DHT expects that many of these, if not the majority, will be retired from the trading fleet.

On the newbuilding front, the leading shipyards are now fully committed for 2019 and have consequently revised their prices upwards.

Speaking on the acquisition opportunities in 2018, Svein Moxnes Harfjeld, Co-Chief Executive Officer of DHT, explained that from an asset price perspective, “it has moved sideways. It’s not marginally upward.”

The company availed of the asset prices last year and acquired BW Group’s 11 strong VLCC fleet.

According to Harfjeld, there seems to be no room for such acquisitions this year.

“I think from a DHT standpoint, our balance sheet does not allow us to really make any growth efforts this year,” he noted.

“We take the liberty to suggest that you should expect a continued disciplined execution as the market evolves over time. “

DHT Holdings reported a net loss of USD 7.5 million in the fourth quarter of 2017, against a net income of USD 17.8 million seen a year earlier. For the full year, the company’s net income reached USD 6.6 million.

World Maritime News Staff