The drop comes despite improved freight rate performance compared to the second half of 2016. The average daily time charter equivalent rates (TCE) for the company’s very large crude carrier (VLCC) vessels stood at USD 41,147 and for Suezmaxes at USD 23,880 during the quarter.
EBITDA for the period amounted to USD 101.3 million, lower from EBITDA of USD 176.4 million seen in the first quarter of 2015.
“Q1 2017 was a confirmation of our thesis: short term challenges but a positive medium structure building for the tanker sector. Asset prices look to be bottoming out in our view confirmed by emerging buying interest from industrial players. However, short-term outlook retains a cautious tone with nearly a quarter of the large tanker order book scheduled for delivery during Q2 2017 and newbuilding contract activity picking up short-term albeit only in the VLCC sector,” Paddy Rodgers, CEO of Euronav, pointed out.
The company said the ordering of tankers in the first quarter was disappointing because 15 new VLCCs have been ordered during the first quarter.
According to the company, the biggest challenge facing the tanker market at present is the concentration of tanker deliveries. The first quarter saw 27 VLCC equivalents delivered to the global fleet – a number which will be repeated during the second quarter. Absorption of these new, un-vetted vessels will occur during a seasonally weak period and will provide a sustained challenge for tanker operators over the summer months.
Otherwise, crude oil markets remain “close to balance” according to the most recent International Energy Agency (IEA) report. Consensus forecasts expect inventory levels to reduce toward more normalized levels during the rest of 2017.
“Euronav retains substantial balance sheet capability and fixed income visibility to navigate through a period of lower freight rates and/or to take advantage of expansion opportunities. The duration of the challenging freight rate environment will be entirely dependent on the number of additional orders to build new ships that are not needed by the market,” Rodgers added.
During the first quarter of the year, Euronav took delivery of two VLCC resales, Ardeche and Aquitaine from Hyundai Heavy Industries’ (HHI) Samho shipyard.