The strong result came as the dry cargo market faced headwinds while the product tanker segment saw “soaring and volatile rates” in 2022.
Norden characterised the first half of 2022 as strong for the dry cargo market, before deflating at an increasing rate through the course of the year. The main factor in the dry market softening was the easing of COVID-19 related inefficiencies, according to Norden.
“The most important factor was congestion, which had grown consistently through 2021 to reach a peak around year end and declined almost uninterrupted during 2022. In addition, the market saw less support from container cargoes migrating to dry cargo vessels, which had benefitted the dry cargo market in the previous two years.”
Looking ahead to 2023, Norden expects the global economic slowdown to lessen demand for commodities, with a possible uptick in the second half of the year.
“This would depend on the global economy bottoming out and Chinese imports rebounding, if the economy recovers from the current wave of COVID-19 infections. However, Chinese imports will most likely still be subdued, as the Chinese building sector is facing the lowest level of activity in over a decade.
For the product tanker segment, average MR spot rates rose significantly to $34,200 per day, reflecting peaks approaching and exceeding $60,000 per day multiple times through the year.
“The improved forward projections for the product tanker market were reflected in the 1-year T/C rate for MR Eco vessels, which increased by more than 100% to USD 32,500 per day at the end of 2022,” said Norden.
The boost in rates brought prices for a five-year-old MR up 43% at the end of 2022.
A slim orderbook and low global stocks supported the market in 2022, but the real driver of high and volatile rates was the war in Ukraine.
“The extreme market tightness was mainly the result of severe bottlenecks in global oil trading, following the outbreak of the war in Ukraine and subsequent sanctions on Russia.
“Some Russian export volumes, which would normally go to Europe, found new markets further away, but mostly it was longer voyage durations due to waiting days and rerouting of cargoes, causing a surge in products on water. This led to soaring freight rates and high volatility, first witnessed in product tanker rates and subsequently in crude rates,” said Norden.
The company expects the volatility and strength of the product tanker market to continue into 2023, with a rising crude market competing for clean tonnage and affecting supply.
“However, risks to the strong base case remain high. Ongoing political uncertainty, including any dilution or phase-out of sanctions, as well as a weakening economic outlook present potential downsides to the base case. Furthermore, a lower gas price could impact the switching from gas to refined oil products as an energy source, which would consequently lower diesel demand in Europe,” said Norden.
The $744m profit for 2022 was split $193m for the Assets & Logistics segment to $550m for the Freight Services and Trading business unit.
“Norden generated very strong earnings both in dry cargo, where the market declined, and in product tankers, where rates surged,” Chair of the Board of Directors Klaus Nyborg and CEO Jan Rindbo said in the company’s annual report.
“This was made possible by a decision early in the year to change the entire group exposure across almost 500 operated vessels, from mostly dry cargo at the beginning of the year to mostly product tankers in the second half of the year. This operational flexibility to rapidly change position across two markets is unique in our industry, and enables us to create value in both rising and falling markets.
“The strong performance will extend into 2023, as we have fully covered dry cargo capacity ahead of the falling freight rates, while locking in tanker coverage at increased rates,” they added.
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