2019 – the start of the next major upturn in tanker shipping
Just as predicted, the market continued to be volatile during the first quarter of 2019, but at a higher level than in the corresponding quarter the previous year. The stronger market is clearly reflected in both the income and the result for the quarter. Result before tax was SEK 1.8 (–38.7) million. EBITDA was SEK 81.6 (7.0) million, corresponding to USD 8.9 (0.9) million.
After the sharp rise at the end of 2018, some tanker market segments have now slowed down again. The main reason for this is the decision by OPEC and other major oil producers to cut production at the end of 2018 and start of 2019, this time by a total of about 1.2 million barrels of oil per day. In addition to the large output reduction, the market has been adversely affected by refinery maintenance and deliveries of new vessels. However, the decline is from a high level and overall rates during the first quarter were considerably higher than in the same quarter the previous year.
Continuing focus on sustainable operation
Looking at our own operations, we continued to work on adapting and positioning the fleet during the quarter. Several of our P-MAX vessels continued to operate in niche trades, where their unique properties are particularly beneficial. Large parts of the fleet are employed in the spot market, which leaves us well positioned to take advantage of the fundamentally positive trend in the market.
For the first time in six years, one of our crew members suffered a lost-time injury during the quarter. The crew member, who injured a hand in the accident, was signed off work but is now fully recovered. We were otherwise free from any serious incidents and accidents during the quarter.
Our overall assessment of the future outlook is unchanged. Several factors indicate a continuation of the volatile markets in the second quarter of 2019, but at a higher level than in the same period the previous year. Then, from the third quarter onwards, things look much more exciting.
At the moment, the large oil producers’ production cuts are a wet blanket over the market. At OPEC’s next meeting, in June 2019, we expect them to decide to return to normal production. The combination of high demand for oil and the current decline in stock levels makes it imperative to get more oil on the market.
The supply side looks better than in a long time. The weak market in recent years has resulted in few new orders for tankers, which will make a clear impression on deliveries from 2020 onwards. And in addition to the smaller order books, which have resulted in fewer deliveries, we also noted a marked increased in the phasing-out of vessels in 2018, mainly driven by poor markets, but also by new regulations – in particular the IMO’s ballast water directive.
Looking ahead, the IMO’s new sulphur directive will also affect tanker shipping in several ways. The directive, which comes into force in 2020, will result in increased demand for low-sulphur fuels, which in turn is expected to bring increased shipping and storage requirements for refined products. The years 2020 and 2021 have all conditions in place to become strong years.
Everyone who has followed us and the tanker market knows that the last few years have been exceptionally difficult. At last, we now see many market factors pointing in the right direction and look very much forward to taking advantage of the opportunities that arise in a stronger market. We have a well-functioning operation and correctly positioned vessels behind us. We have a relatively good position to take advantage of this with a well functioning operation and correctly positioned vessels.