MISC upbeat on petroleum shipping business
MISC cited fewer deliveries and growing long-haul prospects, as well as demand growth from sulphur cap regulations, as reasons for optimism in the petroleum shippng segment. LNG spot rates have been soft recently, but capacity expansion in North America and the Middle East is expected to result in increased requirements for vessels
MALAYSIAN energy shipping company MISC is bullish on rates for both the petroleum and liquefied natural gas shipping markets, forecasting that the petroleum tanker market is “widely expected” to remain firm in 2020.
The optimism in the petroleum shipping business, which it manages through AET Tankers and involves shuttle tankers as well as ship-to-ship operations in the US Gulf, was mainly due to fewer deliveries and growing long-haul prospects, as well as demand growth arising from the implementation of the IMO 2020 sulphur cap regulations, the group said in a stock market announcement.
However, MISC warned that the coronavirus outbreak has posed some risks to the oil and tanker market, and the tanker market could face short-term headwinds if the outbreak is not contained or if the situation escalates.
In the LNG shipping segment, while MISC acknowledged that spot rates ended 2019 lower compared to the previous year mainly due to lack of demand as a result of a mild winter and high inventories, it noted that liquefaction expansion in North America and the Middle East is expected to lead to an increased requirement for vessels and this should support charter rates going forward.
Stable long-term charters and acquisition and redeployment of new vessels helped MISC to post a 10% rise in revenue for the segment to RM2.6bn ($626m) while segmental profit rose by a fifth to RM1.2bn.
MISC highlighted the elevated but volatile petroleum freight rates throughout the fourth quarter of 2019 due to strong seasonal demand and geopolitical factors, but noted it was able to reap some of the benefits of the robust albeit volatile market.
While segment revenue was flat at RM4.3bn, higher freight rates helped MISC to return to a profit of RM360.4m in the segment from a RM12.4m loss in 2018.
MISC posted a 9% rise in net profit to RM1.4bn on revenue of RM8.9bn in 2019.