American Shipping Co maintained both its profitability and its optimism for a firming recovery in its protected US tanker trades.
The Oslo-listed owner of 10 product tankers operating under the Jones Act reported on Friday a net income of $3.6m for the second quarter, up from $1.1m in the same period of 2020.
Adjusting for one-off financial items, profit rose to $4m — a somewhat slower jump of 14% compared to to the three months ending in June of last year.
American Shipping’s fleet represents about one-third of all modern tankers operating under the US cabotage law, commonly referred to as the Jones Act.
Despite ongoing market weakness, company chief executive Pal Lothe Magnussen displayed continued optimism in the prospects of this sheltered market.
“Long-term fundamentals remain attractive,” he said in the company’s earnings statement.
American Shipping pointed to recent mergers and acquisitions activity in the Jones Act sector “at strong valuations”, which the shipowner believes constitutes “encouraging signs for improved market conditions”.
This statement comes after rival Seacor Holdings bolstered its Jones Act tanker fleet on Monday with the acquisition of privately-owned US Shipping Corp.
The price at which this transaction was concluded remains undisclosed.
M&A activity apart, American Shipping said Jones Act market fundamentals are improving as well.
Demand for clean products was still below normal levels in the second quarter, but rates are recovering and currently stand at just 4% below pre-Covid-19 averages, the company said.
“US refinery utilisation is now close to normal levels and above 90%," American Shipping said. "A continued recovery is expected to increase refinery activity further and subsequently demand for Jones Act tanker transportation.”
That optimism also extends to currently subdued crude oil cargoes from the US Gulf to the country’s north-east.
“This trade will return to historical levels as US shale production increases on the back of a continued global economic recovery,” the company said.
American Shipping’s fleet is secured on bareboat contracts to US operator Overseas Shipholding Group. Nine of these contracts expire in December 2022 and December 2023, and the 10th extends to June 2025.
The company steadily maintained its dividend at $0.10 per share.
American Shipping's net income in the first half of the year almost tripled to $7.6m, from a low level of $2.7m in the corresponding period of 2020.
The Jones Act requires all commercial vessels operating between US ports to be built at a domestic yard, controlled, operated and manned by US citizens, and registered under the US flag.
