Norway-based investment company focused on the tanker market Tanker Investments Ltd. (TIL) has secured one-year time charters for two of its Suezmax vessels.
The gross rate for the 2010-built Tahoe Spirit and the 2009-built Shenlong Spirit is USD 19,750 per day for each vessel.
“These two time charters, which commenced in late-March and early-April 2017, increase our fixed-rate coverage to 22% for the majority of 2017 which will help offset the tanker market volatility we expect during the rest of the year,” William Hung, TIL’s CEO, said.
The announcement comes on the back of TIL’s financial results for the first quarter of this year which show that the company recorded a net income of USD 3.2 million, considerably lower than a net income of USD 18.7 million posted in the same period last year.
During the quarter, total revenues dropped to USD 34.1 million from USD 50.6 million in 1Q 2016. This decrease is primarily due to lower spot tanker rates earned across the fleet in the first quarter of 2017 compared to the same period of 2016, according to the company.
“This was another strong quarter for Tanker Investments. We generated earnings per share of USD 0.11 and almost USD 17 million in cash flow on the back of relatively firm tanker rates, allowing us to reduce our leverage to under 42%, which we view as an appropriate level as we’re heading into what we expect will be a period of weaker tanker rates,” Hung commented.
Suezmax spot tanker rate stood at USD 22,821 per day in 1Q 2017, compared to USD 36,130 in the same period last year. Additionally, Aframax spot tanker rate for the quarter amounted to USD 18,238 per day, against USD 27,886 per day in the quarter ended March 31, 2016.
In 2017, the company anticipates high tanker fleet growth to present headwinds to the crude spot tanker market. Total tanker fleet growth for 2017 is forecast to be 24.1 million dwt, or approximately 4.3 percent, which is slightly lower than 2016 but consistent with the ten-year average.
Mid-size tanker fleet growth is expected to be around 10.7 million dwt, or approximately 5.6 percent, for 2017.
After two years of record low scrapping, TIL believes that scrapping has the potential to ramp up in the near term given the current weakness in spot tanker rates combined with an aging fleet across all segments. New regulations, including ballast water management, may also increase scrapping in the medium-term.
Overall, the company expects 2017 to be a year of “softer tanker rates” compared to 2016. However, growing crude oil supply in the Atlantic moving long-haul to Asia is expected to provide some underlying support to help offset the negative fundamentals of lower OPEC supply and a period of higher fleet growth.
TIL anticipates this near-term dip in the market cycle to be relatively short-term in nature, as a lack of new tanker ordering in the mid-sized segments and increased scrapping due to regulatory changes, as well as a more balanced oil market, are expected to lead to a renewed market upturn in 2018.
As of March 31, 2017, TIL’s fleet comprised 18 owned vessels.