OSLO, Nov 27 (Reuters) – The global tanker market is still some time away from a full recovery and Frontline, the crude tanker arm of shipping tycoon John Fredriksen’s business empire, is looking to restructure after heavy losses, it said on Tuesday.
Frontline, once the world’s biggest independent tanker operator, expects some improvement in the fourth quarter thanks to improved market conditions, but balance in the market will not be restored until the scrapping of old vessels increases and global growth picks up, it said.
“The board is of the opinion that it may take some time before a reasonable market balance is restored and sustained recovery of the tanker market occurs,” it said.
“The board is actively … looking for opportunities to restructure the balance sheet and improve the company’s financial position.”
The comments came after Frontline said its third-quarter pretax loss narrowed to $37.1 million from a $39.6 million a year earlier, against expectations for a $40 million loss.
Its spot charter rates for its very large crude carriers (VLCCs) rose to $16,100 a day in the quarter from $12,400 three months earlier, but it estimated the total cash cost breakeven rate for the remainder of 2013 at $22,400 for these vessels.
Tanker rates have been depressed this year, staying well below break-even levels for most of the year before a rally that started in September and took off in October.
Rates for VLCCs exceeded $50,000 in November, primarily on seasonal demand and strong exports from the Middle East, and December bookings indicate rates can be sustained over the short term.
However, rates remain vulnerable in the medium term, some analysts say, as new crude carriers, ordered before the financial crisis, hit the waters and operators remain reluctant to scrap older, less efficient vessels.
Forward rates also foreshadow a dip in charter rates, indicating the market’s deep depression is far from over. (Reporting by Balazs Koranyi; Editing by David Holmes)
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