Reorientation to the East turned the main carrier of Russian oil into profit

The state-controlled Sovcomflot has profited significantly from the reorientation of Russian oil supplies to Asia. The shipowner showed one of the highest figures in the first quarter of this year.

In January-March 2023, Sovcomflot made a profit of $285.9 million from its operations, according to the largest Russian shipowner. The company recorded a loss of $90.8 million a year earlier.

“In the reporting period, the company maintained a positive trend in revenue and profitability, which was due both to the high performance of the conventional tanker fleet against the backdrop of continued positive market conditions, and to the stable performance of the current portfolio of long-term contracts in the industrial segment of the company’s business,” says the shipowner.

It is obvious that the reorientation of Russian oil supplies, which the EU countries received, to the East played into the hands of the company. Mostly in India and China. So, if a round trip to the ports of North-Western Europe from the Baltic terminals took two weeks, then to India – two months.

“… the beneficiary of the development of relations with the East is the shipping company Sovcomflot, one of the world leaders in the field of sea transportation of liquefied gas, crude oil and petroleum products”, Finam reports. “The company has demonstrated impressive growth in financial performance in 2022, despite the pressure of the sanctions and the forced sale of part of the fleet. The continued growth of domestic oil exports to Asia at high tariffs and an increase in LNG supplies against the backdrop of a ban on pipeline gas supplies from Russia will support the issuer’s shares. The target price for them is 84.2 rubles per share, which implies an increase of 24.9%.

The share of Sovcomflot in the transportation of Russian oil may be 25%. Through SUN Ship Management, the shipowner reveals that he currently has a fleet of 92 tankers, including 4 LNG carriers.

Greek shipowners, who also ship significant volumes of oil and oil products from Russia, do not publish financial statements. Nevertheless, for example, Dynacom Tankers Management ordered at the end of April from the Chinese Dalian Shipbuilding Industry (DSIC) the construction of 10 tankers for the transportation of LR2 class oil products (115 thousand tons each), broker Clarksons Shipbrokers reported. The price of the contract is unknown, but the broker estimated the market value of each tanker at $70 million.

Meanwhile, Scorpio Tankers, which is engaged in the transportation of alternative raw materials and products, reports a quarterly profit of $ 195 million and an increase in quarterly freight costs by 2-3 times compared to January-March 2023, depending on the class of the tanker. The shipowner has 113 vessels at his disposal.

“Investor guidance for the second quarter suggests that rates have eased, but slow fleet growth and a significant increase in ton-miles will keep utilization and profits high,” – writes a specialized edition of Lloyd’s List.

Due to the refusal of the USA, Great Britain and the EU from Russian oil and oil products, Russian producers had to reorient supplies to new markets, of which Asia is the main one. At the same time, Western importers also had to switch to alternative supplies, also via longer and more costly routes.

First Deputy General Director of Sovcomflot Alexey Ostapenko “Vestnik SKF” that last year foreign charterers unilaterally began to refuse to execute previously concluded long-term charters. The Russian shipowner was under EU and UK sanctions.

Specialized publications reported that Sovcomflot sold part of the fleet in the spring in order to pay off Western creditors. These included four gas carriers. Indirectly, this information was confirmed by data from navigation portals. Thus, Melampus became Kool Baltic, Mitre became Kool Boreas, SKF Barents became Kool Firn, and SKF Timmerman became Kool Orca. As reported by Lloyd’s List, the four ships were acquired by Eastern Pacific Shipping, which is owned by Israeli billionaire Idan Ofer. A little over $700 million was paid for the tankers.

According to TrendWinds, in total Sovcomflot sold at least 16 tankers and earned $1.3 billion for 14 of them. in the amount of $ 2.1 billion.

Sovcomflot stated that the talk about the sale of the fleet is exaggerated: they sell “age” ships and those that are inappropriate to operate due to sanctions.