Weak spot rates have kept John Fredriksen’s tanker shipping company Frontline in the red in the first quarter of this year as well.
The reported net loss was USD 13.6 million, a switch from a net income of USD 27 million booked in the first quarter of 2017.
However, the loss was considerably reduced from USD 248 million net loss reported in the previous quarter.
“The spot rate environment was weak in the first quarter as inventory draws impacted a freight market that was already suffering from high fleet growth. While there are encouraging signs that seaborne crude volumes may soon increase as a result of changes by OPEC and a slowing trend of inventory draws, the market is not yet factoring in upside potential,” Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS, said.
Frontline’s VLCCs earned USD 14,900 per day in Q1,2018, Suezmaxes earned USD 15,400 per day while its LR2 ships earned 14,800 per day. VLCC and Suezmax rates dropped from USD 19,500 earned in Q4, 2017.
During the quarter the company took delivery of three newbuildings, two very large crude carriers (VLCCs) Front Empire and Front Princess and the LR2 Front Polaris. Two more newbuilding VLCCs are under construction.
Commenting on the market, Frontline said that 2018 is expected to be a third strong fleet growth year in a row, with expected deliveries of up to 45 VLCCs and 13 VLCCs already ordered this year.
Moving forward, the company expects newbuilding ordering to slow down amid high ship prices and constrained shipyard capacity. Further encouragement comes from high scrapping.
“We believe, however, that we are approaching the end of a crude inventory cycle and that inventories will stabilize and then begin to build again,” the company said commenting on the demand.
“Despite the persistence of a weak rate environment, cyclical changes are underway, and until then Frontline remains sharply focused on maintaining our cost-efficient operations and low breakeven levels.”
As of March 31, 2018, the company’s fleet consisted of 63 vessels, which include 46 vessels owned ships.