• Thursday 18 May 2017, 08:48
  • by Wei Zhe Tan

But vessel scrapping expected to pick up in the near term amid weak spot rates and an ageing fleet

OSLO-listed Tanker Investments is forecasting challenges for the spot crude tanker market in 2017 with the global fleet likely to continue growing at a rapid clip.

The tanker operator noted that the world tanker fleet increased by 2.2% year on year to 12.1m dwt in the first quarter of the year with full year growth expected to increase 4.3% to 24.1m dwt overall which is in light with the 10-year average.

Mid-sized tanker fleet growth is forecast to grow 5.6% to 10.7m dwt.

It noted that the trend of low scrapping rates over the past two years is expected to reverse in the near-term amid weakness in spot tanker rates and an ageing fleet for all segments.

It added that new regulations such as ballast water management could also boost vessel scrapping in the medium term.

“However, growing crude oil supply in the Atlantic moving long-haul to Asia is expected to provide some underlying support to help offset the negative fundamentals of lower OPEC supply and a period of higher fleet growth,” said Tanker Investments.

“The company anticipates this near-term dip in the market cycle to be relatively short-term in nature, as a lack of new tanker ordering in the mid-sized segments and increased scrapping due to regulatory changes, as well as a more balanced oil market, is expected to lead to a renewed market upturn in 2018.”

The company reported a fall in total revenues for the first quarter of 2017 to $34.1m versus $50.6m in the year ago period amid softer spot tanker rates during the quarter under review.

For the fleet in the spot market, time charter equivalent rates for its suezmax tankers stood at $22,821 per day compared with $36,130 per day in the year ago quarter with 883 revenue days versus 884.

Spot TCE rates for its aframaxes came to $18,238 per day versus $27,886 per day in the 2016 quarter with 561 revenue days compared with 546.

Cash flow from vessel operations were lower at $16.9m compared with $32.8m in the year ago quarter.

Total interest expenses declined to $4.4m from $5.4m in the 2016 quarter as the company incurred lower average debt balances.

As such, net income for the quarter fell to $3.2m for the first quarter compared with $18.7m in the year ago period.

As of end-March 2017 the company had cash on hand of $39.5m and undrawn credit lines of around $77.1m for a total of $116.6m compared with $109.9m as at end-December, 2016.

During the quarter, the company secured one-year suezmax time charters for two tankers, the 2010-built 156,900 dwt Tahoe Spirit and the 2009-built 159,000 dwt Shenlong Spirit at rates of $19,750 per day.

“These two time charters, which commenced in late-March and early-April 2017, increases our fixed-rate coverage to 22% for the majority of 2017 which will help offset the tanker market volatility we expect during the rest of the year,” said Tanker Investments chief executive William Hung.