Norway’s Avance Gas is monitoring time charter exposure in a rising market.
The John Fredriksen-owned VLGC owner took a decision last year to limit coverage to capitalise on spot rates.
“It’s not nice to improve your time charter coverage if the spot market is better,” chief executive Oystein Kalleklev told a conference call.
It is now more about adjusting the period coverage, he explained.
“Last year, we saw that sentiment around the 2023 market was pitiful,” the CEO told the call.
“So you could have fixed our ships for 12 months or 24 months. But the level you would have to be doing that was pretty low,” he said.
“So, given our strong financial position, we decided not to fix that many ships and rather stay in the spot market where we thought we would make more. And of course, we’ve been proven correct,” the CEO added.
But the stronger spot market now is driving up period rates “substantially”, driven by a better arbitrage situation, Kalleklev explained.
“So we look at this on a daily basis,” he told the call.
“It’s not like the time charter market is super-liquid, where you can just pick up the phone and say, I want to fix one ship for 12 months at $50,000. So it takes a lot more work to do a time charter than a spot voyage,” Kalleklev added.
Making more money on spot deals
Period rates are at $40,000 per day, but spot exposure has been closer to $65,000, the CEO said.
“So we’re making a lot more money on spot, and we will be making more money on the spot in Q3,” he added.
“But let’s see, if we do any big time-charter business, we will report that,” Kalleklev concluded.
Avance Gas has this week posted its best-ever interim earnings, with better to come in the rest of 2023.
The Oslo-listed company said net profit was $35.7m in the second quarter, compared to $18.4m in the same period of 2022.
For the third quarter, Avance Gas estimates average rates in the “high $50,000s” per day.
