Product tanker major Hafnia Limited believes that further consolidation is needed within the product tanker sector to fully unleash value and synergies from additional operational scale.
Hafnia Limited was set up in January 2019, following a merger between BW Tankers with Hafnia Tankers, a fellow subsidiary of BW Group. The merger was effected through a share swap arrangement, where newly issued shares of BW Tankers were exchanged for all outstanding shares of Hafnia Tankers.
The merger was followed by a major consolidation move between Diamond S and Norden in June 2020 to join their respective product tanker fleets.
The deal was welcomed by Hafnia as a way of rebuilding the balance between supply and demand in the face of reduced oil consumption.
The supply-demand balance is even more important having in mind the impact of the COVID-19 pandemic on the demand, as well as supply of ships once the market starts to rebound post-covid.
“As a consequence of the global pandemic, oil demand decreased significantly in the first half of 2020, and refinery output across the globe adjusted accordingly. Receding product tanker demand was a natural and predicted consequence of this demand destruction,” Mikael Skov, CEO Hafnia, said.
“With a flattening contango curve towards the end of the second quarter, the market also saw vessels coming out of floating storage and returning to the active fleet. This increased available tonnage steadily throughout the third quarter, decreasing rates in line with our expectation that part of the global fleet would be less busy as oil inventories and demand recalibrated.”
The latest quarter has been Hafnia’s best third quarter since 2016, yielding a marginal net profit of $0.4 million.
The company delivered a marginally positive result for the quarter and with a year-to-date net profit of $175.2 million yielding an annualized ROIC of 12.3% and an RoE of 20.4%.
Skov said that the quarter provided a glimmer of hope for a smooth rebalancing of the market for the transportation of refined oil products.
The product tanker market in Q4 2020 thus far has been an extension of the suppressed market in Q3 2020, according to Hafnia.
This is due to the second wave of coronavirus in the northern hemisphere followed by lockdowns in many countries, making it difficult for the company to assess the current state of the global economy and resulting oil demand.
“Similarly, the product tanker market outlook at present remains somewhat bearish short term. Current trends in drawdowns of product and crude oil inventories look likely to continue for the rest of 2020 and into early 2021 while vessels unwinding from floating storage,” the shipowner said.
At the end of the quarter, Hafnia had 87 owned vessels and 15 chartered-in vessels, including six LR2s, 36 LR1s 1, 47 MRs, and 13 Handy vessels.
The company has two new buildings on order that would be chartered out to Total on long term charters.
At the end of October, Hafnia, through the Vista JV with CSSC Shipping, ordered two Aframax-type LR2 vessels equipped with LNG propulsion.
The vessels will be built at Guangzhou Shipyard International (GSI) and are scheduled for delivery in 2023.