Product tanker giant Hafnia is in no hurry to fix its vessels on term charters as rates fall in the spot market.
The Singapore-based, BW Group-owned company said it remains on a watching brief as it evaluates the level of forward rates compared to one-voyage deals.
“Our view is, and always has been, we constantly value and review the current forward market for either time charter or other ways of fixing our earnings, and compare that to our view of the spot market,” chief executive Mikael Skov told analysts on its first-quarter conference call.
"So we have actually been doing a bit of term coverage, but so far it's still predominantly a fleet on spot."
But time charters could become more attractive for the outfit.
“Our view has not changed in the sense that if you feel that the forward curves and the forward time-charter rates are higher than how we see the spot market develop, we are going to increase the amount of hedging accordingly,” he said.
Rates hit record highs in April and May as vessels were taken out of the market to store oil following a demand crash and a production glut.
Ship values little changed
Skov said there had been plenty of volatility together with the spike.
"However the vessel values have seen little change, as an indication of an expectation of a short-lived rate spike," he said.
Skov said there have only been five or six quarters in the last 20 years where the market has seen inventory draws.
"The first ones were driven by economic setbacks and production cuts while the later ones have been caused by strong demand outpacing production growth," he said.
As to how things might unfold from here, he said: "Looking at tanker cycles, we have a period of weak market when the oil market is in rebalancing mode. However, the production growth is by far more important for the tanker market compared to demand growth."
The volume of oil in storage has risen from 130m barrels to 200m barrels in 2020.
The International Energy Agency has predicted oil demand to fall by 9m barrels per day in 2020 but, as it rebounds, the company said oil will start to be drawn down.
Refineries back in business?
“There’s no doubt that a lot of the product that we are storing outside ports has already sailed to areas where it’s needed,” Hafnia commercial vice president Soren Winther said.
"We actually think refinery runs will come back to some extent."
He said, for example, South African refiners are looking to imports coming out of the Middle East Gulf.
"As to how fast they will get up to a high run [rate], that still remains to be seen," he said.
The company's bosses added that they had also seen "very strong and very long delays" for ships carrying imports into terminals.
This is easing now a little as demand for oil products increases, they said.
Hafnia added that jet fuel and ultra low-sulphur diesel are the most stored products, with gasoline and naphtha being the products with the quickest turnaround.
The company has calculated a full-year cash break-even figure of $13,625 per ship for 2020.
It said its break-even stood at $14,182 per day in the first quarter, while its vessels averaged rates of $22,430 during that period.
Oslo-listed Hafnia posted net earnings of $77.1m in the three months to 31 March, compared with $27.9m a year ago.
The company said it was attractively positioned to "target opportunistic accretive growth" with a "well-capitalised" balance sheet.
