Denmark’s Torm is cashing in on a new opportunity happening “right now” to ship Chinese oil products into Europe.
New government export quotas mean cargoes are flowing West that were not being seen just a week or two ago, chief executive Jacob Meldgaard told a Fearnley Securities tanker webinar.
“Obviously, a discussion could be [had] around whether China’s relatively slow recovery in their economy will also be affecting negatively our markets,” the CEO said.
“And what we are seeing there is that the export quotas of refined products are leading to, for instance, jet fuel flowing from China into the EU as we speak,” he added.
Meldgaard told the webinar: “That was not taking place even one or two weeks ago.”
The boss explained this is important, meaning the clean tanker market does not depend on one single driver of demand.
He also called the Chinese trade “relatively inefficient”.
“We ourselves fixed two LR2s on exactly that route, which has been very slow to move over the past six months. So that’s a very positive trend going into the coming season and into the coming months,” Meldgaard said.
The Torm chief remains positive on the product tanker market.
He expects to see fourth quarter oil demand eating into inventories globally.
More arbitrage chances
“And why is that good? Well, there’ll be less efficiency in the oil market, there’ll be more arbitrage,” he explained.
This means a better opportunity for Torm’s clients, the refiners, to maintain high refinery margins, the CEO said.
“And this is all leading to an environment where the tonne-mile set-up for product tankers…is stronger when you have these production costs being extended,” he added.
Net profit in the second quarter at the Danish product tanker company was $184.3m versus $99.7m in 2022, boosted by strong markets and unrealised gains on financial instruments related to freight and bunkers of $37m.
Revenue was up at $384.3m from $338.5m, and there was a 23% increase in time charter equivalent earnings to $36,360 per day.
