Severe headwinds in the historically low tanker market dampened the performance of the healthy dry cargo market in the third quarter of 2018, pushing Danish shipping company Norden to a loss of USD 12 million.
The loss is being reported against last year’s Q3 profit of USD 4 million.
In the third quarter of 2018, Norden’s dry operator generated a contribution margin of USD 11.5 million and an adjusted result of USD 2.3 million. The result is an improvement year-on-year compared to last year’s loss of USD 2.1 million.
The dry owner recorded an adjusted result of USD 4 million for the quarter and USD 13 million for the first three quarters of 2018.
Based on the forecasts of continued low fleet growth, Norden expects rates in 2019 to remain at a similar level as this year, with global macro-economic conditions likely be slightly weaker. However, fleet growth continues to be at manageable levels – especially for Supramax and Panamax vessels, the company said.
During the third quarter, Norden entered into agreements with Japanese tonnage providers to charter in two 82,000 tdw Panamaxes over a 5-year duration with delivery in 2020 and purchase options. The vessels will be of eco design and fitted with scrubbers.
Norden’s tanker business posted a loss of USD 18 million, much wider than last year’s equivalent of USD 1 million.
The company’s Handysize tankers generated daily earnings of an average of USD 9,062, while daily earnings in the MR fleet amounted to USD 10,347.
The product tanker market suffered severe headwinds during the quarter and spot rates were the lowest seen in a decade. The main factors pushing the market down were declining product imports in Asia, South America and Middle East in combination with significant competition from crude vessels due to low rates in that market, Norden explained.
Nevertheless, the company expects slowing supply growth and normal seasonality to trigger rate increases in the fourth quarter.
“At the beginning of the fourth quarter rates for crude vessels have improved and there have also been positive signs for product tanker rates in the Atlantic. In 2019, additions to refinery capacity, low fleet growth and a better crude tanker market are expected to lead to improving product tanker rates. In addition, the introduction of the IMO sulphur cap on emissions from bunker fuel is expected to further support the market balance starting in the second half of 2019,” the company said.
Overall, for 2018 the Danish shipowner maintains the expectations for the adjusted result to be USD 0-30 million.
Image Courtesy: Flickr-Kees Torn under CC BY-SA 2.0 license