A new, strong market situation
At the end of the year, the tanker market took a sharp upturn. This development is evident in all market segments and is largely structurally driven. All in all, this means that, after several years of weak markets, we are now in a new, strong market position. The “tanker boom” that we talked about is now with us.
Looking at the year as a whole, developments were largely (unfortunately) as we expected. The year started weakly but still all right. There then followed two exceptionally weak quarters, which had an adverse effect on ship deliveries and refinery maintenance in particular. Then the upturn we had predicted for so long came in the fourth quarter. The drivers behind the upturn include structural factors in the form of underlying stable demand for oil, extensive US exports and ever-decreasing net tanker fleet growth. In addition, the installation of scrubbers on a relatively large number of vessels and delays in port for bunkering also reduced the total available fleet, which has further strengthened the market.
Delay effects due to previously signed charter contracts mean that, for our part, the stronger overall market was not noticed until the end of Q4 2019.
Result before tax for the full quarter amounted to SEK –29.3 (–19.4) million. EBITDA was SEK 62.3 (77.1) million, corresponding to USD 6.5 (8.9) million. For the full year, result before tax was SEK –102.3 (–181.9) million and EBITDA was SEK 249.5 (56.8) million, corresponding to USD 26.4 (6.5) million.
Active work on the fleet
Regarding our own fleet, we continued to position the vessels according to the current market conditions during the year. We have continued to seek niche trades for our P-MAX vessels, where their unique properties are particularly beneficial. At the time of writing, five of the P-MAX vessels are on special trade routes in Brazil, for which they are particularly well suited. The other five P-MAX vessels are in the spot market where they now have the potential to exploit their ice class during winter. We believe that there is a good mix of spot/fixed contracts at present. Other vessels in the fleet, the two IMOIIMAX vessels and the Suezmax tanker Stena Supreme, continue to be employed in pools with market-leading earnings.
Looking at our sustainability work, we are satisfied with what we have achieved. Our vessels provide a good, safe workplace for the seagoing employees and our focus on maintenance and safety is confirmed by customers’ ongoing controls and our own incident statistics.
New legal structure
As part of our efforts to reduce our administrative costs and also establish ourselves within a relevant maritime cluster with a European tonnage tax, we are now changing our corporate structure as we enter 2020. The business will be run from Denmark and be part of the Danish tonnage tax system.
Market outlook 2020
2020 has started strongly and we now have the overall market situation that we have long predicted. Looking ahead, our overall view of market development is largely unchanged. We continue to expect a strong, stable market during 2020. 2021 also has the potential to be a year of good markets. The drivers include structural causes in the form of good demand for oil and balanced stock levels. At the same time, the weak markets in recent years have meant few new orders, resulting in record-low order books. At the beginning of 2020, the order book amounts to about 6.5 percent of the total existing fleet, while the average for the last 10 years is just under 15 percent.
As far as vessel orders are concerned, it is not uncommon for them to rise during periods of stronger markets. It bodes well that we are not seeing signs of this so far. From order to delivery takes about 18–24 months. This means that with each month that does not have an increasing number of orders, there is more opportunity for a profitable market.
We now have a very exciting year ahead of us. Based on a well-functioning operation and well-positioned fleet, we now very much look forward to taking advantage of the opportunities that arise in a stronger market.
