Pointing to the recent OPEC agreement to raise output by about 1m barrels per day, MISC said: “This development is expected to be positive for tanker markets as demand for crude tankers is likely to pick-up and the Very Large Crude Carriers (VLCC) segment is expected to benefit the most, especially for the Arabian Gulf-Asia trade.”
And while fleet growth continues to outpace tanker demolition rates, rising global oil consumption, higher US exports and eroding inventories is expected to support the recovery in freight rates in the medium to longer term, MISC said in a press release accompanying its second quarter results.
MISC posted a 7% drop in second quarter revenue to MYR2.14bn ($524.7m) from MYR2.30bn in the second quarter of 2017, mainly due to a weaker performance from its liquefied natural gas (LNG) shipping business where one of its LNG carriers had a charter renewed at lower rates.
Commenting on the LNG sector MISC said: “In the LNG shipping segment, current spot rates are rising gradually on the back of improved chartering activities. International LNG trade has continued to thrive from both a supply and demand perspective, mainly driven by demand growth from strong enforcement of coal-to-gas switching policies in China and expected new and/or ramping of LNG supplies from the Atlantic during second half of 2018.”
Looking ahead it added: “Despite the tonnage oversupply situation in the spot market, indicators are positive for further improvements through the rest of the year. Nevertheless, our present portfolio of long term charters will provide stable income and cashflow to the group’s LNG business segment.”
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On the offshore oil and gas (O&G) business, MISC said: “The group believes that the steady oil price recovery in recent months and renewed interest in growth opportunities have led to increase of activities in the offshore segment, especially for developments within the Atlantic Basin. Such optimism is expected to boost the number of projects approved which will also represent opportunities for the group, both locally and internationally. Our existing portfolio of long term contracts will also continue to support the stable financial performance of the Offshore business segment.”
MISC noted however that despite the growing optimism for an increase in offshore activities, these have yet to trickle down to real opportunities for its Heavy Engineering segment, resulting in continued pressure for this segment in 2018.
MISC president and group ceo Yee Yang Chien said: “In the face of market conditions that are highly volatile and challenging, the group continues to record notable developments that reflects our resilience in demonstrating excellent performance operationally, our ability to consistently create value across the group as well as to leverage on growth opportunities available in the industry. We remain optimistic that our strong presence in the market will continue to sustain our development and provide the impetus to drive us forward.”
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