TORM, a Danish product tanker owner, says it expects volatility in the markets to persist as a result of the uncertainty caused by Russia’s military operation in Ukraine. 

“We expect market volatility to continue for a long time as a result of this black swan event, which will eventually lead to cargo flow disruptions and higher freight rates,” said managing director Jacob Meldgaard.

He said the company has decided to stop business with Russia, even as wide-ranging sanctions by western nations do not extend to energy for the time being.

“As it stands, anyone who engages with trade with Russia would be on the right side of the law. What is more relevant is the exposure of banks, finance,” he told Lloyd’s List. “We’ve decided not to engage with new business related to Russian ports or Russian counterparties, but we cannot stop what has already been contracted” prior to the point when Russia began its incursion into Ukraine.

While the company does not expect any direct impact on its operations, considering its current customer base, main suppliers and financial counterparties as well as covenants in its loan facilities,  it does anticipate increased volatility in freight rates, bunker costs, foreign exchange rates and vessel values.

Last year, it made 40 port calls in Russia and Ukraine from a total of 3,000. That is a 1% exposure to the area. 

While it does have Russian and Ukrainian crew on board its vessels, the conflict has so far not affected personal interaction, Mr Meldgaard said.  

Setting aside the Russian incursion into Ukraine, the world’s oil demand is back to pre-pandemic levels, with oil-consuming nations continuing to draw down stocks, which means less oil is being moved than is being used.

A rebuilding of stocks is therefore expected, which will bode well for the product tanker market.

Coronavirus, which had delayed the market recovery, also poses less risk to global oil demand growth in 2022.

The company had 64 owned tankers on the water, as at end-2021, with 20 vessels under sale-and-leaseback arrangements.

It has installed 51 scrubbers out of 57 planned, and the remaining six are expected to be installed before the end of the first quarter next year, including one on the long-range two newbuilding Torm Houston (IMO: 9904883), which was delivered earlier this year.

Torm reported a net loss of $8.2m for the fourth quarter of the past year, compared with a loss of $40m in the year-earlier period. It made a loss of $42.1m for the full year compared with a profit of $88.1m in 2020.