UK shipping fund Tufton Oceanic Assets saw its net asset value (NAV) return fall into negative territory in the final three months of 2022.
The figure to 31 December was -3.8% as values fell overall, but there was growth of 7.7% for 2022 as a whole.
The London-listed company said the return in the fourth quarter would have been positive but for a substantial increase in negative values for older product tanker charters.
“As the negative charter value unwinds going forward, NAV will increase by 10%,” Tufton added.
The product tanker market continued to strengthen, with benchmark time charter rates rising to their highest level since 2005, leaving a gap between new deals and older contracts for some of Tufton’s ships.
The easing of Covid-related lockdowns in China, refinery expansions in the Middle East and Asia, and slowing fleet growth suggest the product tanker market will remain strong in 2023.
“Asset values should rise as confidence builds in the duration of the market strength — or, if rates moderate, negative charter value should unwind more than charter-free values drop,” Tufton said.
The tightening product tanker market also benefits chemical tankers as 25-30% of MRs are engaged in the chemical/vegoil trade.
More product/chemical tankers have shifted away from chemicals to meet the rising clean demand, the company added.
The chemical tanker market is also expected to benefit from slowing fleet growth and improving demand growth, primarily in China, in 2023.
Bulkers to improve
The company also announced a dividend of $0.02 per share for the fourth quarter.
At year-end, the unaudited NAV was $431.6m.
For bulkers, the relatively low charter cover resulted in limited charter value gains as asset values fell in a weakening market, the fund said.
Beyond seasonal weakness in the first quarter, Tufton expects the market to improve as demand growth recovers, supported by strong supply-side fundamentals.
The company agreed to sell its last containership in the period, leaving it with 22 vessels.
