CMB.TECH sees regional bears facing market bulls

CMB.TECH, the diverse shipping company that emerged from CMB’s buyout and renaming of Euronav, announced a $98.1m profit for the third quarter, bringing nine-month profits to $777.7m.

Appraising the markets its diversified fleet has exposure to, CMB.TECH lined up regional bearish challenges in China and the Middle East against more bullish influences from the oil, iron and steel markets.

Population decline in China and a reduction in domestic air travel were listed alongside the rise of LNG trucks and electric vehicles (EVs) and a lack of stimulus in the country as bearish impacts on ocean trade. In the Middle East, OPEC’s downward forecast revision, lower energy forecasts from the IEA and EIA were noted, as well as the growing grey and dark fleet absorbing Iranian cargo volumes and geopolitical risks in the Strait of Hormuz.

On the bull’s side, the company sees support from iron and steel being bolstered by a stabilisation in China’s property market, monetary policy support from the People's Bank of China (PBOC). Iron ore supply increases of around 220m t per year was seen as good news for volumes, as well as growth in bauxite supply.

For the oil sector, India is seen driving long-term demand growth, and the twin impacts of OPEC+ restoring volumes and lower oil prices were seen to support demand for oil and oil transportation.

“Long-term impact of the PBOC Monetary Policy support and the geopolitical risk are both double-edged swords that currently overhang the shipping sector, where certain events and outcomes could cut one way or the other on rates,” the company said in its Q3 presentation.

The tumultuous past year at the company means its revenues of $714.2m for the first nine months of 2024 are lower than its $777.7m profit over the same period, due to the over half a billion dollars booked in asset disposals. Revenues were down on-year for both the quarter and nine-month period, although on-year comparisons are of limited value. In its first half results 2023, Euronav had an owned fleet of 64 crude tankers and two FSOs, and an orderbook of five suezmaxes. At the end of Q3 2024, the renamed CMB.TECH has a fleet of 113 ships across its divisions, plus 46 on order.

The company was sailing close to the limit on a $200m bond covenant at the end of the quarter, reporting equity on its total assets at 30.4%, just above the 30% minimum required by the terms of Euronav’s 6.35% five-year bond, due to mature in September 2026.

“We intend to fully comply with our covenants every quarter, like always,” said CMB.TECH CEO Alexander Saverys, adding that the company can maintain the ratio by selling assets and continuing to have profitable quarters. Responding to another question in the call, he said the company’s lower cash on hand was due to a preference to repay its revolving credit facilities.

Three newbuildings were delivered in the third quarter, with a further five ships delivered in the fourth quarter to date. The company’s divisions include tankers, dry bulk, container shipping, chemical tankers, and offshore wind, and its $2.06bn orderbook is spread across all of those shipping segments.

Addressing the CMB.TECH earnings call, Saverys said the company’s future fleet plans were to develop a fleet of profitable, modern, and green vessels, and that the balance of the fleet by ship type and sector would be dictated by markets. CFO Ludovic Saverys said there would likely be a decrease in the company’s tanker fleet as it contains the company’s oldest vessels, but noted its recent orders as proof CMB.TECH remained committed to tankers as part of its diversified strategy.

In the company’s earnings presentation, container shipping was the only CMB.TECH market with a cautious supply/demand balance outlook, owing to 10.3% fleet growth expected in 2024 and 4.9% in 2025, as well as an orderbook to fleet ratio of 24.6%. CMB.TECH has five container ships on time charter, no ships on the spot market.

The company said projections were for a more difficult 2025 for the container fleet if Red Sea disruption were to ease. CMB.TECH has a single container ship left on order, a 1,400 teu dual-duel ammonia vessel due for delivery from Qingdao Yangfan Shipbuilding in July 2026.

In the dry bulk market, where the company’s 28 ships all operate on the spot market, the outlook was more positive, with historically low orderbook to fleet ratios and a fleet age reaching 14-year highs. Tonne-mile growth of 5.1% for capesizes in 2024 is forecast to drop to 0.1% in 2025, however, according to CMB.TECH’s figures.

Asked whether the recent court decision in Belgium that led to CMB.TECH paying an extra $36m to Euronav shareholders for shares sold during its mandatory bid for Euronav, Saverys played down the impact of the decision, and the significance of reopening the bid.

“In recent months, we inaugurated our brand-new hydrogen engine R&D centre in Japan, we took delivery of two container vessels, two chemical tankers, three dry bulk vessels and one crude oil tanker and we sold two of our oldest Suezmax tankers. Our strategy of decarbonisation, diversification and optimisation of our fleet is in full swing.”