Euronav CEO Calls for More Recycling, Ordering Restraint
- Business & Finance
Fresh from merging with Gener8 Maritime, Belgian crude oil tanker company Euronav reported a net loss of USD 51.6 million for the first half of 2018.
Proportionate EBITDA for the same period was USD 98.8 million, down from USD 151.8 million year-on-year.
According to the company’s CEO Paddy Rodgers, the completion of the Gener8 merger during the second quarter of 2018 reflected a huge amount of work for Euronav, providing the company with a platform of over 70 large tanker vessels.
In addition, Euronav took delivery of the third Suezmax newbuilding, the 156,600 dwt Cap Port Arthur on August 8, 2018. The fourth and last vessel from Hyundai Heavy Industries is due for delivery at the end of August. These vessel orders are accompanied by four seven-year time charter contracts.
“Demand for and supply of crude oil remain resilient, boosted recently by a directional change from key OPEC participants and well supported by expansion in ton miles, elevated recycling activity and impending regulatory change,” Rodgers said.
“However, the rebalancing of the tanker market requires further affirmative action in reducing primarily older tonnage, restraint from contracting and a supportive oil price structure. Euronav remains confident on the medium term prospects for the large tanker market and today we see some short term improvements in the supply of both crude and tankers.”
During the first six months of the year, 41 VLCC equivalents (33 VLCCs and 16 Suezmaxes) were removed from the global fleet, according to Pareto’s data, which compares favorably with the 69 VLCCs removed during 1985 – the record year for recycling.
Accompanying this trend, prices in both the VLCC and Suezmax sectors for newbuilds have been rising 9% and 7% respectively during the first semester, according to Clarksons.
Euronav hopes that the trend would be continued amid favorable recycling prices, negative cash flow pressure on older tonnage from challenged freight rates, low utilization and growing pressure from incoming regulatory changes.
“Further fleet rebalancing is however required before the freight market can make sustained progress as the new build delivery schedule remains concentrated particularly in the VLCC sector well into 2019,” the company insists.
Speaking on the tanker market, Euronav said that whilst recent proposals from OPEC to increase production are positive for the tanker market, they are caveated by volatile supply signals from Venezuela, Libya and Iran, primarily over how sanctions are imposed on them.
“Should sanction imposition be aggressive this could lead to 20-30 Iranian tankers being removed from the global trading fleet to be used for domestic floating storage which would provide a positive boost to the tanker market in the second half,” the company added.
So far in the third quarter of 2018, the Euronav VLCC fleet operated in the Tankers International Pool has earned about USD 17,100 and 60% of the available days have been fixed. Euronav’s Suezmax fleet trading on the spot market has earned about USD 12,725 per day on average with 60% of the available days fixed.