Torm is set to clock up its best quarter in three years in the opening three months of 2019 in what promises to be a stronger year for the product tanker market.
Copenhagen and US-listed Torm broke even in the fourth quarter to finish 2018 with a pre-tax loss of $33m; but its first quarter bookings suggest a return to the black in imminent.
Jacob Meldgaard, executive director of Torm, said the run rate for the first quarter, with 85% of its vessel days covered at $18,500 per day, is the highest since the start of 2016.
“The first quarter will be the highest for the past three years and a solid profit for the quarter I expect,” he told TradeWinds.
Jon Chappell, an analyst at Evercore ISI, says Torm’s fourth quarter performance easily exceeding the large losses generated by most product tanker peers and its guidance suggested a “robust return to profitability” this year.
Meldgaard says the tanker market is expected to soften in the second quarter, given a seasonal refinery maintenance period that will be heavier that usual amid perpetrations for IMO 2020, before springing back up in the second half.
“I don’t think we can ascribe the current strength to anything related to IMO 2020,” Meldgaard said.
“What I would expect is, in the second half of the year, we would start to see more effect from the implementation of IMO 2020.”
Torm sold four older vessels in the fourth quarter and a fifth has been disposed of in the early weeks of 2019.
At the same time Torm has two LR1s and seven MR newbuildings for delivery in 2019 and the first quarter of 2020.
Meldgaard says additional orders are unlikely at present pricing levels, but further secondhand additions were possible.
“In the first part of last year we did our final contracting of newbuildings. If I look at the prices verses if we wanted to repeat that activity, they have gone up by 15% to 20%,” he said.
“It doesn’t really tickle me to go and put further newbuilding orders on. If we were to do anything, it would be in the secondary market, where we would be looking, potentially, If there were units available that we like and the pricing was right.”
