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Euronav sees tanker market recovery in sight

Company says prospects for a strong rebound in oil supply, restocking, and consumption returning to 2019 levels are ‘all on track’

Company using the downturn in the market to rejuvenate its fleet through drydockings ahead of a tanker market recovery later this year. It has also taken delivery of a couple of newbuildings, with six more to follow, while divesting older tonnage

EURONAV, a tanker company focused on the very large crude carrier and suezmax segments, believes the start of a market recovery is within reach.

The Omicron variant had deferred the recovery from late in the past year. 

“We believe this is a temporary pause,” chief executive Hugo de Stoop said in the company’s fourth-quarter results statement. “Prospects for a strong rebound in oil supply, restocking requirements of global crude inventory, and consumption returning to 2019 levels are all on track for delivery during 2022.

“Euronav maintains a strong balance sheet and liquidity position and is using the downturn in the cycle to upgrade its fleet through an intense” drydock programme.

The Belgian company accelerated several scheduled dry dockings during 2021, with 19 VLCCs and six suezmaxes having completed the works. During 2022, 11 VLCCs and five suezmaxes are due to be drydocked, the majority of which are “front-loaded” given the expectation of a more sustained recovery from the second half of the year.

Last month, it took delivery of two new modern suezmaxes — Cedar (IMO: 9907433) and Cypress (IMO: 9907445) — built at Daehan Shipbuilding in South Korea. It will add six more newbuildings to its fleet over the next 18 months.

It has also divested four VLCC's. 

Oversupply of tonnage, particularly in the VLCC segment, is continuing to ease thanks to the recycling of older vessels, according to the company. About 25% of the overall fleet is more than 15 years of age and the costs of carrying out special surveys may outweigh the benefits of keeping the vessels trading.

However, scrapping rates would have been higher were it not for “illicit” trades from Iran, which have taken up 50-60 tankers aged between 18 and 22 years, channelling about 1m barrels of oil per day away from the commercial trading fleet, it said.

There is “a pressing need” for the International Maritime Organization to do something about this, for the sake of safety and the environment, said head of investor relations Brian Gallagher on a call with analysts.  

Cargo volumes meanwhile look “encouraging” this year, Euronav said, with a 4.6m bpd rebound, based on estimates from the International Energy Agency and the Organization of the Petroleum Exporting Countries. The groups are also expecting an oil supply increase of about 6.2m bpd.

Global crude inventories are at a six-year low, requiring restocking of some 2.7bn barrels, laying “the foundation for a tanker market recovery over the coming 12 months,” Euronav said.

So far in the first quarter, its VLCC fleet that operated in the Tankers International Pool has earned about $12,500 per day, while its suezmax fleet trading on the spot market has also generated $12,500 per day on average. 

The company reported a loss of $72.5m in the fourth quarter compared with a loss of $58m in the year-earlier period. Its full-year loss amounted to $339m from a profit of $473m in 2020

Despite current market conditions, the company has maintained its dividend policy of distributing $0.03 per share per quarter.   

The company also announced the successful trial of a biofuels blend on a suezmax tanker.

The biofuel, supplied by TFG Marine, the bunkering arm of Trafigura, was tested on its longevity and durability over a period of four months.

“The idea behind it was to be helpful in the decarbonisation” of the industry, but it is “not a long-term solution,” Mr de Stoop said on the call.

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