A number of break spots in the Atlantic Basin market amid continued strong demand for clean petroleum products into both Latin America and West Africa, coupled with an end to the CPP inventory runoff for destocking and a historically low order book for Medium Range tankers, should result in a rapid return to strong market conditions by year-end, Ardmore Shipping CEO Anthony Gurnee said Wednesday.

“We are at the cusp of a significant rebound in earnings,” Gurnee said during the company’s first-quarter 2017 earnings call.

Although products and hence MR demand continued to be negatively impacted by destocking from a high level of refined product inventories in the first quarter, this was partially offset by strong demand for US Gulf Coast gasoline and diesel from Latin America, according to Ardmore’s first-quarter earnings presentation.

The fundamental upside in the Atlantic Basin has resulted in an uptick in time charter equivalent rates of 5% in the first quarter over Q4 2016 values to an average fleet level of $12,919/d from $12,307/d, respectively.

Spot freight in the Americas, however, declined by 1.1% on the US Gulf Coast-Chile run to an average $30.08/mt in the first quarter from an average $30.40/mt during Q4 2016, according to S&P Global Platts data. USGC-Brazil and the USGC-trans-Atlantic trips declined by 5.2% and 2.9%, respectively, to the first quarter from Q4 2016.

Yet going forward, petroleum demand growth in the range of 4%-5%, supported by a 1.3 million b/d growth in global oil consumption in 2017, as estimated by the International Energy Agency’s April oil market report, bode well for a further recovery of trade flow volumes. Inventory drawdown is expected to be concluded in Q4 2017.

“When you look at CPP stocks globally there is a continued runoff and that can happen independently of the crude stocks,” Gurnee said. ?Overall, we would like to see inventories much lower, but when we see them let’s have them at the refinery gate than at the user end,” he said, referring to recent US inventory builds.

One the supply side, Ardmore sees the order book to drop to a net fleet growth of approximately 2% in 2017 and 1% or lower in 2018, and hence expects a significant rebound in charter rates as early as the fourth quarter of this year.

“There has been a fairly limited amount of MR ordering in the last month or two […]the only yard that you can go to today with a refund guarantee would be Hyundai Mipo and they can still take an order for the end of 2018,” Gurnee said. “Japanese yards are filled out until the end of 2019 and Chinese yards are closed for one reason or another.”

Ardmore Shipping owns and operates a fleet of 27 vessels, including 21 Eco-design MR tankers and six Eco-Mod design IMO 2 product/chemical tankers.

Source: Platts