Euronav tries to escape challenging freight rates by bringing forward dry dockings

Belgium’s tanker shipping company Euronav has decided to bring forward dry dockings in order to counter the challenging freight rate market in the short term.

As informed, a total of nine vessels are planned to enter a dry dock.

“This flexibility allows 15% of Euronav’s fleet to execute its regulatory dry dock requirement during a depressed market whilst also providing the potential benefit of an improved freight rate market in the future,” the company explained.

Since the middle of Q3, freight rates remained under rising pressure. This is due to the continued uncertainty over crude oil demand recovery as COVID-19 restrictions remained in place. Another factor is limited supply and visibility of cargoes given high compliance within OPEC+ on production costs. Freight rates are under pressure also because of the increasing supply of available VLCC and Suezmax tankers. These factors are unlikely to alleviate significantly in the short term, Euronav believes.

On the other hand, a specific bright spot in the short term is the recovery in VLCC scrap prices since May, rising 18%, as steel prices have gained momentum. This indicates a potentially more buoyant backdrop for the recycling market into 2021, the company said.

“A growing divide between rising short-term fleet supply and limited cargo availability, restricted by OPEC+ production cuts and a slower demand recovery for crude, has impacted the sector negatively and is likely to continue throughout the seasonal winter period,” Hugo De Stoop, CEO of Euronav, commented.

“With our sector low leverage, supported by over USD 1 billion liquidity, Euronav is well positioned to navigate these challenges and potentially seize value creative opportunities should they arise.”

The dry docking decision was unveiled in the company’s financial report for the third quarter of 2020 showing that Euronav posted a net income of $46.2 million, compared to a net loss of $22.9 million seen in the corresponding period a year earlier.

EBITDA for Q3 2020 stood at $151.8 million, compared to $96.8 million recorded in Q3 2019.

On 30 September 2020, the Suezmax Bastia, owned in joint venture, was delivered to its new owners. The vessel was sold for $20.5 million. The vessel was acquired in November 2019 in a 50/50 joint venture with affiliates of Ridgebury Tankers and clients of Tufton Oceanic.

During Q1 2020, Euronav announced it had entered into an agreement for the acquisition, through resale, of four VLCC newbuilding contracts from the DSME shipyard in South Korea. These Eco-type sister ships will be fitted with scrubber and ballast water treatment systems and are scheduled for delivery during Q1 2021.

On 11 September, the company concluded a new loan facility for $713 million which will be partially used for the payment of these vessels. The loan includes terms with clear targets to reduce Euronav’s GHG emissions over its entire duration.

After the quarter end, Euronav also time chartered-in two Eco-type Suezmax vessels for two years to enhance existing strategic relationships and achieve economies of scale.

On 4 November, Euronav’s joint venture with International Seaways has signed an extension for ten years for the FSO Asia and the FSO Africa. The additional ten years are expected to generate revenues for the joint venture in excess of $645 million. Based on Euronav’s ownership in the joint venture, the ten-year contract extensions are expected to generate in excess of $322 million in contract revenues for the company.

Euronav’s owned and operated fleet consists of 2 V-Plus vessels, 45 VLCCs — four to be delivered–, 26 Suezmaxes –one of which is in a joint venture and two vessels time chartered in– and 2 FSO vessels –both owned in 50%-50% joint venture.