Danish product tanker owner Torm forecasts that higher charter rates will lift it back into profit this year, after reporting improved first-quarter results.

Torm said it achieved time charter equivalent rates of $16,743 per day in the first three months of the year, up from $13,493 in the same period of 2021, more than tripling Ebitda to $60.4m.

It lifted profit before tax to $10.7m, reversing a loss of $21.1m a year earlier.

The improvement came despite the product tanker market being negatively influenced by declining volumes of longhaul trade, resulting in LR rates falling below MR rates at the beginning of the year.

Russia’s invasion of Ukraine in late February led to a partial re-routing of trade flows towards longer-haul trade, resulting in freight rate hikes to levels last seen in the spring of 2020, it added.

Torm said its fleet coverage for the second quarter is now 65%, at $28,348 per day, and it has 29% of earning days in 2022 covered at an average rate of $25,530 per day.

That $25,530 average over a whole year would amount to a profit before tax excluding non-recurring items of $226m to $257m, assuming all other things were equal, the company added. Last year’s loss was $41m.

Torm said its break-even TCE rate in 2022 is about $15,000 per day.

Sanctions on Russia have led to record high arbitrage spreads for sending Middle Eastern and US diesel to Europe, and consequently increasing longhaul flows, it said.

Markets in the west have outperformed those in the east, it added, with the US Gulf benefiting from increased flows to Europe and strong demand from South America.

Product exports from the US Gulf surged from an average of 1.9m barrels per day (bpd) in the first two months of the year to 2.3m bpd in March, with US Gulf refiners reacting swiftly to the strong margins landscape and running at around 95% utilisation.

Early in the second quarter, US Gulf freight rates for MR tankers peaked at around $100,000 per day, Torm said.