Euronav has released its half year results and outlook for the rest of the year and 2020
Euronav has reported that its revenue for the first half of 2019 was US$401M and after expenses and other items resulted in a loss of US$19M for the period.
In an earnings call, Euronav chief executive Hugo De Stoop said the company’s plan for 2019 had "always anticipated freight rate weakness to start during Q2 as larger and longer than usual refinery maintenance programmes ahead of IMO 2020, OPEC production cuts and heavy delivery newbuilding schedules would exacerbate seasonal lower cargo volumes."
He noted that the prediction had been correct, but that Euronav remained disappointed in a lack of recovery in rates.
"Nevertheless, we remain constructive on freight rate recovery in Q4, based on continued US crude export volume growth and IMO 2020 preparation and its related induced reductions to vessel supply," he said.
Mr De Stoop also noted that his company had taken out a sizeable loan in advance of the impending onset of 2020 fuel regulations.
"Secondly, we have also taken an additional $100 million credit facility in order to assist us with the preparation for IMO 2020 and in particular our fuelling strategy for our fleet," he said.
Looking ahead to Q4 2019, Euronav’s quarterly report argued that vessel supply was the most important factor in the tanker market and commended owners’ ordering restraint.
Only one VLCC has been ordered so far in 2019.
Looking longer term, Euronav believes this restraint will continue due to uncertainty regarding fuel propulsion systems and the fuel required to meet IMO greenhouse gas targets. Along with many owners, Euronav has to justify its decisions to shareholders and avoid the “stranded assets” scenario.
On the demand side, Euronav’s quarterly report noted “Demand forecasts have weakened modestly over 2019 with the three core agencies (IEA, EIA and OPEC) cutting 2019 demand growth forecasts from 1.4M b/d to 1.2M b/d. It should be noted that this remains above the long-term trend growth average of 1.1M b/d (since 1990).”
The company also noted that secondhand prices for modern VLCCs and Suezmax tankers are back up to Q1 2016 levels.
As Euronav’s report said ”… prospects give encouragement for Q4, refinery production is anticipated to return to higher levels for this period ahead of IMO 2020’s introduction in January next year. US crude export growth continues and the recent mark of 3.9M b/d in June reflects that infrastructure bottlenecks are being overcome.”
The report also cited the unknown impact of VLCC and Suezmax tanker supply leaving the fleet to undertake eco technology retrofits (scrubbers or ballast water treatment systems) to meet IMO regulations.
The report revealed a handy reference point for other VLCC and Suezmax operators: Euronav VLCCs in the Tankers International Pool have earned an average of US$26,600 per day and its Suezmax tankers US$15,800 per day so far in Q3 2019.