The second quarter of 2023 was largely dominated by work on continued vessel sales. The product tanker Stena Penguin was sold and delivered during the quarter and agreements were signed for the sale of another two vessels after the end of the quarter.
THE TANKER MARKET REMAINED STRONG in the second quarter of 2023. Average earnings per day for an MR tanker employed in the spot market amounted to approximately USD 22,700 (24,900). However, the trend was declining and in June and July rates averaged around USD 16,200 per day. The drop in earnings also affected the rates for shorter time charters. A 12-month contract for an MR tanker was valued at USD 30,000 per day in April but fell to USD 25,250 per day in June. The slightly weaker end to the quarter is partly explained by a tightening of OPEC production quotas and continued economic uncertainty, particularly in China. The asset values of vessels were affected to a lesser extent during the quarter. This is because the freight market fluctuates faster than assets. A 10-year-old standard MR tanker was priced at USD 34 million throughout the quarter. In July, slightly lower valuations were noted for older tonnage, but newbuilding prices are still very high for all vessel types.
Varying trends in other segments
The trends for other vessel segments were mixed. Dry bulk has experienced a downward trend in the medium-sized classes throughout the last year. Container vessels had a somewhat flat development with a slight improvement for some size classes. However, earnings are down to levels last seen before the big surge during COVID. The LNG segment fell sharply in the early part of the year compared with the record levels in 2022. The offshore market has had a prolonged upward trend.
Earnings and result
For Concordia Maritime, earnings for the two vessels employed under the time charter contract with Stena Bulk during the quarter amounted to USD 15,500 per day. Total profit-sharing for the first six months amounted to approximately USD 70,000. The reason it is not higher is that both vessels are on a charter from Stena Bulk to an end customer, which was entered into at the market levels prevailing in 2021. Earnings for Stena Polaris, which is out on a bare-boat contract, correspond to a time charter of about USD 18,000 per day. Result after tax for the quarter amounted to SEK 37.0 (35.7) million, which was mainly a consequence of the sale of Stena Penguin. Result after tax for the first half of 2023 amounted to SEK 40.0 (5.2) million.
Sale and delivery of Stena Penguin
When the first P-MAX vessels were sold in Q1 2022, before the market upturn, this was a direct consequence of the Company’s strained financial position. Subsequent sales have been gradual and in line with our long-term strategy of phasing out older tonnage. At the end of May, Stena Penguin (2010) was delivered to her new owners. The transaction had a positive liquidity effect of approximately SEK 215 million after repayment of the bank loan. After the end of the quarter, we have agreed on the sale of the vessels Stena Premium (2011) and Stena Progress (2009). The sales are being conducted with the conviction that, given the strong market, the time is right to “cast off” and sell tonnage of the type and age that Concordia Maritime has had. The driving forces behind the decision also include the contractual situation for most of the vessels, with long contracts until 2026, signed at what, in today’s market, are low levels. The outlook for the tanker market remains positive for autumn, but with a tense geopolitical situation, a defiant OPEC and an uncertain international economy, things can change quickly, which is why we have chosen to act now. After the sales that have now been agreed, the Company will have repaid all loans and will have a net cash position – something that looked highly unlikely at the beginning of 2022.
In parallel with the work on the existing fleet, we have looked at possible future paths for Concordia Maritime’s continuing business. In this work, we are not closing any doors but looking broadly at both the tanker and other segments. Some projects are concrete and discussions are in progress with potential partners, while other paths are at an earlier stage. As always, timing is important, both when buying and selling. In the tanker market, the price level is, as mentioned, high and it may be appropriate to let the market cool down before investing. In dry cargo, asset values have come down slightly due to a weak freight market. In offshore wind, prices are rising but demand is growing strongly. High shipyard prices are common to all segments. That said, we are working methodically, in the best interests of our shareholders, to find the right deal with the right counterparty at the right time.
Gothenburg, August 2023
Erik Lewenhaupt, CEO
Footnote: Unless otherwise stated, market data is taken from Howe Robinson.