Euronav bullish on next two years

Euronav sees the fundamentals for the industry as very strong, a "constructive market," according to ceo Paddy Rodgers, with fleet growth pegged at 2% and 3% for 2015 and 2016, with most deliveries weighted to the far end of 2016, "which means that these ships will not impact the spot market until the early part of 2017... Fleet growth at this level was last seen in 2003/2004, the start of the last super-cycle."

Oil majors, receivers and charterers of ships understand these market conditions and so are looking to secure ships for period charters, as they grow anxious over tightening supply and demand in the sector. This, Rodgers stated, can already be seen in the rising time charter rates.

The company revealed that the break even rate for its fleet will fall to $22,700 per day for suezmax tankers and $27,700 per day for VLCCs upon the expected repayment of the $235m of mezzanine financing that is expected to take place in February.

For 2015, Euronav's VLCCs in the Tankers International pool have 53% of their days fixed at $59,400 per day. The company's suezmaxes on the spot market are 69% fixed at $40,300.

Rodgers' second reason for a positive outlook is the current state of contango, "the last time this situation developed, it continued through 2009 and 2010 for 24 months. We believe that 5% of market sailing capacity has been booked [for storage] and will only leave the market at the end of Q1... We believe in Q2 this could increase up to 10% of the fleet."

The ceo addressed concerns in the market that cheaper bunkers and higher rates might lead to a speeding up of the fleet, in turn increasing capacity. "At the moment we do not believe that this will necessarily be a direct correlation resulting in significant or tangible increase in supply. Our belief is that the market has learned the hard way over the last five years how to manage the variable costs of a voyage. As a result, owners sail at ecospeed in ballast until they fix their vessels, at which point they don't speed up to full capacity, but speed up at a level that will deliver the ship to a cargo on a just-in-time basis."

Rodgers also explained during the call that the drop in bunker prices has yet to have a significant effect on earnings as ships continue to burn through significant existing stocks on board, and estimated that many wouldn't begin to see the benefit of cheaper bunkers until late in the first quarter.

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