Busy refineries boosting tanker freight rates in the oil tanker market helped both Danish shipping companies D/S Norden and Torm to record higher profit in the third quarter, they said on Wednesday (Nov 11).
D/S Norden reported an operating profit of $20.8 million compared with a loss of $27.6 million in the third quarter last year as growth in its tanker business offset losses in its dry bulk division. Torm’s operating profit increased to $71.4 million from $4.0 million a year ago.
“During the third quarter, the product tanker market reached its highest level since 2008 primarily due to continued high refinery utilization supporting demand for transportation of refined products,” Torm said in its report.
Torm achieved spot rates of $24,599 per day for its medium range product vessels in the third quarter, which is up 77 percent from a year earlier.
The company has left the dry bulk market which has been struggling since the 2008 financial crisis and is now hit by slower growth in China. Dry bulk vessels transport commodities such as coal, timber and steel.
Torm weathered the crisis in the shipping industry since 2008 particularly badly and earlier this year restructured its debts. Funds managed by alternative investment firm Oaktree Capital Management control 62 percent of Torm’s shares now.
The company has now 68 owned and four chartered product tanker vessels. D/S Norden by contrast remained in the dry bulk sector and controls a fleet of 198 dry bulk vessels and 48 tanker vessels.
“Low oil prices and strong demand have kept tanker rates up also during the third quarter, which is otherwise considered to be low season,” Chief Executive Jan Rindbo from D/S Norden said.
Low crude prices are good for refineries as it reduces the costs of feedstock for producing refined products. But the sluggish dry bulk market may be a concern for D/S Norden in the future.
“We have a negative outlook on the dry bulk market for the next couple of years, and believe that D/S Norden will be harder hit in 2016 than in 2015 due to lower contract coverage,” analyst Jonathan Staubo from Fearnley Securities wrote in a note to clients.
Source: Reuters (Reporting by Ole Mikkelsen, editing by William Hardy)