Concordia Maritime
Concordia Maritime - Stock draws reduce tanker demand (Introduce)

2020-08-10 11:35
Rates have dropped since the Q1 report…
…having fallen below cash breakeven so far in Q3…
…and we now expect less upside in Q4
Tanker rates have cooled since the Q1 report
Suezmax rates in Q2’20 have averaged ~USD 47kpd (down 14% q-o-q and up 206% y-o-y), well above the CBE of ~USD 25kpd. MR tankers were at ~USD 27 kpd per day (up 42% q-o-q and up 135% y-o-y), above their CBE of ~USD 17kpd. Since the Q1’20 report, rates have cooled and averaged ~USD 26kpd and ~USD 18kpd for Suezmaxes and MRs, respectively, lower than reported bookings of USD 55kpd (68% of Suezmax Q2 days) and USD 20 kpd (39% of Product tanker Q2 days). As such, we have slightly reduced our expected CCOR Suezmax tanker and product tanker Q2’20 realised rates to USD 48kpd (USD 55 kpd) and USD 19kpd (USD 20 kpd), respectively, resulting in Q2’20 EBITDA of SEK 123m.

Rates fall below cash breakeven as draws bite
With chaos in the oil markets helping tanker rates to reach historically high levels in H1’20, rates have fallen to below cash breakeven levels. A seasonal slowdown and continued pressure on seaborne oil demand is negatively affecting tanker utilisation. This is being made worse by draws from both land-based and floating storage, with the latter also increasing available vessel supply, and consequently further suppressing rates. Since mid-June, Suezmax and MR rates have averaged USD 14kpd and USD 9.4kpd, respectively. As such, we expect Q3’20 bookings from CCOR to be at levels around ~USD 15kpd for Suezmax tankers, and ~USD 10kpd for the product tankers.

Upturn in Q4 likely to be weaker than initially expected
Whilst Q4 is usually the strongest quarter in the year, that will likely not be the case in 2020. We expect rates to rise above Q3’20 levels, but reduce our Suezmax and Product tanker Q4’20 rate estimates to USD 40kpd (USD 55kpd) and USD 18kpd (USD 24kpd), respectively. In summary, we reduce our 2020 EBITDA to SEK 392m (SEK 560m).


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