Euronav Says 2017 Was a Challenging Year
2017 was a challenging year for th Belgium-based tanker owner Euronav NV from an operational perspective on account of challenging freight market driven by ship oversupply & OPEC restrictions, said Paddy Rodgers, CEO of Euronav.
The concentrated delivery schedule of new tonnage coupled with restricted crude supply from extended OPEC production cuts maintained freight rates at low levels throughout the year.
Despite these headwinds, demand for oil continued to remain robust and above long-term trend boosted by rising global economic growth and a supportive oil price structure.
Tthe key challenge for the tanker market remains the concentration of deliveries of newbuildings in both the VLCC and Suezmax sectors. If the illness is low freight rates then the cure is low freight rates as that should drive more ships to be removed from the active global fleet.
Euronav notes an encouraging recent rise in recycling activity but it needs to be sustained before an inflection point in the cycle can be reached.
Medium- and longer-term prospects for the tanker market remain constructive, underpinned by a solid recurring demand for crude, structural change in financing likely to constrain future vessel supply growth and a likely acceleration in the retirement of older ships from 2017 onward encouraged by environmental legislation on ballast water treatment and particularly from sulfur emissions in 2020.
The duration of the current challenging freight rate environment will be entirely dependent on the number of additional removals of older ships that are not needed by the market and the number of newbuildings added to the current order book.
"Until this inflection point is reached, Euronav retains substantial balance sheet capacity and fixed income visibility to navigate through such a period of lower freight rates and/or to take advantage of expansion opportunities," Paddy said.
