Concordia in bullish mood - back in the black

Apr 26 2019

Concordia Maritime has reported a positive result before tax of SEK1.8 mill for the first quarter of this year, compared to a negative SEK38.7 mill for the corresponding 2018 quarter.

EBITDA was SEK81.6 mill, compare with just SEK7 mill in 1Q18, corresponding to $8.9 mill and $0.9 mill, respectively.

Just as predicted, the market continued to be volatile during 1Q19, but at a higher level than in the corresponding quarter in the previous year. The stronger market is clearly reflected in both the income and the result for the quarter, the company said.

After the sharp rise at the end of 2018, some tanker market segments have now slowed down again. The main reason for this was the decision by OPEC and other major oil producers to cut production at the end of 2018 and start of 2019, this time by about 1.2 mill barrels of oil per day.

In addition to the large output reduction, the market has been adversely affected by refinery maintenance and deliveries of new vessels. However, the decline is from a high level and overall rates during the first quarter were considerably higher than in the same quarter the previous year, Concordia said.

The company said that it continued to work on adapting and positioning the fleet during the quarter. Several of the P-MAX vessels continued to operate in niche trades, where their unique properties are particularly beneficial.

Large parts of the fleet were employed in the spot market, which leaves Concordia well positioned to take advantage of the fundamentally positive trend in the market, the company said in its presentation.

Concordia’s overall assessment of the outlook is unchanged. Several factors indicate a continuation of the volatile markets in 2Q19, but at a higher level than in the same period the previous year. However, from the third quarter onwards, things look much more exciting, the company said.

At the moment, the large oil producers’ production cuts are a wet blanket over the market. At OPEC’s June 2019 meeting, Concordia said it expects a decision to return to normal production. The combination of high demand for oil and the current decline in stock levels makes it imperative to get more oil onto the market.

The supply side looks better than for a long time. The weak market in recent years has resulted in few new tanker orders, which will make a clear impression on deliveries from 2020 onwards. And in addition to the smaller order books, which have resulted in fewer deliveries, Concordia also noted a marked increased in the phasing-out of vessels in 2018, mainly driven by poor markets, but also by new regulations – in particular the IMO’s ballast water directive.

Looking ahead, the IMO’s new low sulfur edict will also affect tanker shipping in several ways. It will result in increased demand for low-sulfur fuels, which in turn is expected to bring increased shipping and storage requirements for refined products. The years 2020 and 2021 have all the conditions in place to become strong years.

“At last, we now see many market factors pointing in the right direction and look very much forward to taking advantage of the opportunities that arise in a stronger market. We have a well-functioning operation and correctly positioned vessels behind us. We have a relatively good position to take advantage of this with a well functioning operation and correctly positioned vessels,” Concordia said.


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