Clean tanker owner and operator Ardmore Shipping expects global product tanker ton-mile demand to increase 7%-8% due to the EU oil embargo of Russian products, CEO Anthony Gurnee said during the company’s third-quarter earnings call this week.
The Russian oil embargo has the potential to continue boosting demand in an already tight market, which we expect will persist into 2023, essentially until geopolitical circumstances change,” Gurnee said.
However, total Q4 refined product demand in Europe was expected to fall below Q4 2019 levels due to high food and energy prices forcing households to reduce spending in the winter, according to S&P Global Commodity Insights’ European Oil Market Forecast.
Ardmore reported record-high earnings for Q3 2022 of $61.6 million in adjusted earnings, bolstered by spot market time charter equivalent, or TCE, earnings for their Medium Range Eco-design tankers at roughly $47,000/d. The company stated that performance continued to exhibit similar signs into Q4, as 40% of Ardmore’s MR Eco-design fleet ship-days were already booked at $45,000/d, with an outlook for a strong last quarter of the 2022 fiscal year.
Volatility continues into Q4 2022
Amid volatility and dislocations of oil products, Ardmore stated in its earnings presentation that Europe must replace 1 million b/d of refined product imports from Russia, particularly naphtha and diesel, prior to Feb. 5, wherein the Russian price cap on refined product is expected to come into effect. Ardmore expected volatility for the product tanker market to continue amid the consensus made by the G7 countries.
Notably, freight for the 38,000 mt US Gulf Coast-UK Continent route oscillated around $45/mt in Q3, having peaked at $77.08/mt on Aug. 2 and hit a low of $26.98/mt on Aug. 16, according to data from S&P Global Commodity Insights. Volatility persisted for the trans-Atlantic route in the period, with an average daily change in freight during the quarter seen at $3.90/mt, up 7% from the $3.65/mt daily average change seen in Q2 and 86% higher than the average daily change of 52 cents/mt in Q3 2019.
So far in Q4 2022, average daily changes in freight were around $1.56/mt for the 38,000 mt USGC-UKC route.
Spot TCEs, time-chartered vessels boost earnings
Ardmore Shipping reported Q3 average earnings for its MR ECO-design tankers at $47,050/d, up 53% from what the company reported in Q2. As of Nov. 2, Ardmore had fixed approximately 40% of its total MR revenue days for the fourth quarter at an average TCE of approximately $45,000/d in the MR ECO-design segment. Overall, the company’s MR tankers earned an average TCE rate of $42,835/d in Q3, with about 40% of the total MR revenue days for Q4 fixed at $43,000/d.
After having sold and time-chartered back their older Ardmore Sealeader, Sealancer, and Sealifter tankers, the company reported a reduction in their vessel operating expenses and time charter-in levels of approximately $13,000/d.
Ardmore has 27 Medium Range tankers in operation, including five chartered-in ships, with 21 MR tankers ranging from 45,000 dwt to 49,999 dwt and six Eco-Design IMO 2 product/chemical tankers ranging from 25,000 dwt to 37,800 dwt. The company has also been commercially managing three of Carl Büttner’s 24,000 dwt chemical tankers since March 1, 2021.
Source: Hellenic Shipping News
