Euronav suspends operations with Russia over war
Given the uncertainty related to Russia’s military incursion into Ukraine and the subsequent official sanctions and self-sanctioning, the company says the effects on its financial results will be difficult to quantify
While the crude tanker owner expects tonne-miles to increase as trade flows are disrupted, it also foresees crewing and bunker costs to go up amid the turmoil
EURONAV, a crude tanker owner, has outlined how the Russian incursion into Ukraine will impact its business.
The company has “suspended its operations with Russian customers”, it said in its annual report. That represents an “insignificant portion” of the company’s turnover (below 5%).
Second, due to self-sanctioning by oil traders, refiners and shippers of Russian petroleum products, the tanker market has evolved in the short term towards longer tonnage and different cargo specifications, it said.
The longer-term prognosis is that tonne-miles may increase because of the adjustment of trade flows to compensate refineries and markets for the lack of Russian oil flows.
Third, the price of marine fuels has increased because of the conflict and is anticipated to remain elevated for the foreseeable future as Russia supplies 20% of the global fuels such as high-sulphur fuel oil, very low sulphur fuel oil and marine gasoil.
“These price increases will negatively impact the cost structure of the vessels, making it more expensive to ship freight on long-haul voyages,” the Belgian company said.
The spread between HSFO and VLSFO was at a high level before the military incursion but has begun to correct as the removal of Russia-origin HSFO from the market has begun to tighten up supplies in Europe and in the Mediterranean, it said.
The current conflict also makes crew changes “problematic” as travel may not be available nor the ability to repatriate a crew member to their home, Euronav said, adding that this could impact vessel operations as new officers may not have the familiarity of the vessel they are joining.
This could result in extra annual crewing costs of a maximum of $500,000, the company said.
“Going forward, it remains difficult to estimate the future impact of this war situation in the economies where we are active, and hence difficult to quantify the impact these factors might have on our financial results,” it added.
The company said it has taken additional measures as cyber security risks have also increased.
