We continue to outperform the market
Concordia Maritime generated higher earnings than the market, but a weak overall market still led to a negative result for the quarter. Overall, we reported a result before tax of SEK –41.2 (33.4) million. EBITDA was SEK 29.3 (103.4) million, corresponding to USD 3.3 (12.2) million. It is pleasing to report another quarter without any Lost Time Injuries onboard our vessels.
As expected, the first quarter of 2017 was weak. High inventory levels, reductions in OPEC production and extensive ship deliveries contributed to generally low market rates – with a decline in income as a result. Compared with the same period the previous year, average rates were about 30 percent lower in the MR segment and about 50 percent lower in the Suezmax segment.
Our own operations progressed flawlessly during the quarter. All vessels in the fleet performed well and with good employment. Several of them were employed in exciting new niche trades during the quarter, in regions such as South America, China and the Pacific. All in all, this contributed to another quarter of higher income than the overall market. In the product tanker segment spot, our income was just over USD 14,000 per day, compared with the market average of about USD 11,000.
Better balance between supply and demand
As previously announced, we expect the market to remain weak for much of 2017. The combination of high inventory levels and large numbers of new ship deliveries will almost certainly make its mark on the market for several quarters to come.
However, it should be pointed out that oil inventories are gradually decreasing, while deliveries of new ships will slow in the future. The extensive ship deliveries in the period 2015-2017 are a direct consequence of the orders placed in previous years. The peak was reached in 2013 when as many as 237 new MR vessels were ordered. Only 25 new MR vessels were ordered in 2016 and so far this year, mid-April, five vessels have been ordered. As the deliveries decline, so the prospects of a more balanced market increase. A clear indicator of this is the fact that the order book for the entire tanker fleet is currently at about 12 percent of the existing fleet. In the boom year of 2008, the corresponding figure was about 45 percent. Looking at supply, the trend is now better than for many years.
In terms of demand for transportation, our fundamental view remains optimistic. If we look at global demand for oil and oil products, the trend is positive. Annual demand has increased by an average of 1.2 million barrels per day since 1998, and there is nothing to indicate that this would change in the near future. On the contrary, we expect that the low price of oil and ongoing changes in the global refinery infrastructure will continue to contribute to underlying stable demand for transportation of both oil and refined oil products and chemicals. In addition, we are also seeing increasingly complex transport and distribution routes. In purely concrete terms, the changes mean an increased distance from the refinery to the end consumer, which in turn means that more vessels are required to meet the transport needs.
On this basis of the above factors, our current assessment is that we will see a gradually stronger market in 2018. As always, we do our best to take advantage of the opportunities that arise, regardless of where we are in the business cycle. These may involve purchases, sales or different types of contracts. Here and now, it is about managing a temporarily weaker market, to ensure we have the best possible position when the turnaround comes.