Torm

Tankers post-pandemic

Torm’s CEO discusses what will drive the markets and his own company in the coming 12 months

Norwegian pure play product tanker company Torm, is continuously looking to maintain and renew its fleet as the company rides through significant volatilities in the market.

Jacob Meldgaard, CEO of Torm, has noticed that after the initial stock building period, which was characterized by increased long-haul trade, floating storage and inefficient trade patterns, the market has entered into the stock drawing period, which poses headwinds to the product tanker market as local inventories are replacing some of the trade.

“This includes drawing from both onshore and offshore inventories, whereas the latter is, to a large extent, done now with most of the vessels

“We are continuously looking to maintain and renew our fleet in the most profitable manner”

tied up in floating storage having returned to the market. We believe the market has already absorbed most of the effects from the unwinding of floating storage,” Meldgaard says.

Meldgaard believes in the short term the biggest challenge to the market will be the impact of inventory draws while in the longer term, the current weak demand and uncertainties related to COVID-19 are strongly impacting refinery economics.

“However, it must also be said that not all of the currently high inventories will replace imports to meet local demand, some of these will be exported. A good example here is high diesel inventories in the US, which is a diesel net-exporting country,” he adds.

On the supply side, Meldgaard reckons the orderbook as a percentage of the fleet is currently the lowest in at least 20 years, mitigating the negative effects from stock drawing in the short term and meaning favorable tonnage supply side over medium/longer term.

“We are continuously looking to maintain and renew our fleet in the most profitable manner. This can be done through the purchase of modern secondhand tonnage, contracting newbuildings, or selling off older tonnage. Further, we maintain our fleet through scrubber investments,” Meldgaard says, adding that so far this year, the company has taken delivery of four newbuildings, sold seven older vessels, ordered two newbuildings, and conducted 16 retrofit scrubber installations.

“The recent sale of seven older vessels in the second quarter at attractive prices is supporting us to actively pursue attractive opportunities in the market as they arise,” Meldgaard says.

Torm currently operates a fleet of about 80 vessels and has two vessels on its orderbook.

Talking about the current Covid19 situation, Meldgaard believes the pandemic will continue for the foreseeable future and the crew change challenge will remain a headache.

According to Meldgaard, at its peak, around 40% of the company’s crewmembers were overdue to head home, a figure that has since dropped to around 10%, something the CEO and his team are justifiably proud about.

Despite the strong market volatility, Torm achieved a profit of $128m for the first six months of 2020.

“We are as always focused on optimising our performance under the prevailing market conditions and with Covid-19 still very much a part of our daily life and an important factor both commercially and technically, we have to pay special attention on our operations,” Meldgaard says.

As well as his Torm duties, Meldgaard is chairman of Danish Shipping. Previously he was in charge of Norden’s dry bulk division and before that held various positions with J Lauritzen and Maersk. ●

Spot on Torm

NASQAQ-listed Danish shipowning bluechip. Formed in 1889 and one of the top names in product tankers today.