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Tanker growth 'manageable' argues bullish Euronav

Tanker growth 'manageable' argues bullish Euronav
Euronav reporting its strongest Q1 earnings for eight years at $113.5m is bullish on tanker prospects thanks to “manageable” fleet growth in the coming quarters.

The $113.5m profit compares with $80.8m in the first quarter 2015. Revenues for the period were $214.8m compared with $204.5m in Q1 2015.

While there are industry concerns as tanker tonnage hits the market in the latter half of 2016, Euronav highlighted that only one VLCC and two seuzmaxes were ordered in the first quarter which it said reflected the, "emerging barrier to entry of access to capital to the tanker sector".

"We believe that further vessel supply should remain constrained for the foreseeable future. The consequences of the financial crisis continue to have an impact on bank lending capacity but also on shipyard’s ability to sell and produce newbuildings," the company said.

Looking at the immediate demand and supply balance Euronav ceo Paddy Rodgers said: “We believe that this demand growth should translate into an annual requirement of between 36 and 49 VLCCs. Therefore, we believe this demand structure is adequate to absorb the increase in vessel supply for the rest of 2016 and 2017 (30 net scheduled remaining VLCC deliveries in 2016 and 37 in 2017).”

During the quarter, the company took delivery of the second and third vessels of the four VLCCs acquired as resales of existing newbuilding contracts in June 2015: 299,320 dwt Alice in January and 299,445 dwt Alex in March.

The fourth in the series, Anne, is set for delivery in May.

However, the report read, the company “does not intend to place speculative newbuilding orders,” highlighting that “Absent of long-term contract for employment with a customer or an equivalent vessel to scrap, increasing the order book and the world fleet cannot make sense for anyone regardless of the price in view of the current market outlook which while promising does not require further supply growth.

“Euronav remains committed to its policy of distributing 80% of net income to shareholders (excluding exceptional items such as gains on the disposal of vessels),” concluded Rodgers. “We believe that the outlook is positive and sustainable for Euronav and the tanker sector."