TORM plc: Product Tanker Market Update (Podcast Transcript) (NASDAQ:TRMD)

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Jacob Meldgaard, CEO of TORM plc (NASDAQ:TRMD), joined J Mintzmyer on Value Investor’s Edge Live on Jan. 10, 2023, to discuss the product tanker markets, upcoming catalysts, company strategy, and capital allocation plans. Torm is a major US-listed product tanker company with a fully-delivered fleet of 78 vessels. Torm was a massive winner in 2022 as rates improved and Torm shifted to a dividend policy of paying out nearly 100% of free cash flow as dividends.

This interview and discussion is relevant for anyone with product tanker investments or interest in the overall sector, including other firms such as Ardmore Shipping (ASC), Hafnia Tankers (Oslo: HAFNI), International Seaways (INSW), Navios Maritime Partners (NMM), Scorpio Tankers (STNG), or Tsakos Energy Navigation (TNP). Dynamics in the product tanker market (i.e. gasoline, diesel, jet fuel) often spillover to the crude tanker market, which includes firms like DHT Holdings (DHT), Euronav (EURN), Frontline (FRO), Nordic American Tankers (NAT), Okeanis Eco Tankers (Oslo: OET), and Teekay Tankers (TNK).

Topics Covered

• (0:00) Intro/Disclosures
• (2:30) Current state of the product tanker market?
• (4:45) Impact of upcoming Russian product ban?
• (7:30) Might product tankers ‘sell the news’ in February similar to crude?
• (9:45) What are some of the key risk factors to this market?
• (14:00) Balance sheet update: any need for more deleveraging?
• (17:15) Thoughts on repurchases vs. dividends?
• (20:15) Potential to tender some of Oaktree’s shares?
• (22:00) Any appetite to buy ships? Potential to divest older tonnage?
• (23:45) Any interest in newbuild vessels?
• (25:15) Discussion on newbuild dynamics and yard availability.
• (32:00) Any impacts from VLCC maiden voyage schedules?
• (33:30) How might shifts in the Ukraine conflict impact the tanker market?
• (37:30) Why pick TRMD over any other publicly-listed tanker stocks?

Full Interview Transcript

J Mintzmyer: Good morning, everybody. Happy New Year 2023! Welcome to another iteration of Value Investor’s Edge Live exclusive shipping interviews. We’re excited to kick-off this series here in January 2023. We’re starting with TORM plc (TRMD) to learn about the product tanker markets. We’re hosting CEO Jacob Meldgaard this morning. He’s going to talk to us about the specific MR and LR markets in product tankers, as well as how TORM is positioned in this market, what their capital allocation plans are, and shareholder return plans are for 2023. We’re very excited to have Jacob on the line this morning. Jacob, welcome. Happy New Year! Thank you again for joining us.

Jacob Meldgaard: Happy New Year to you and a pleasure, as you say, to kick-off 2023 new year here.

J: Yeah. Very, very exciting times in the product tanker space. Before we begin, just quick disclosures. Nothing on the conversation today, constitutes investment advice in any form. I have no current position in TORM, stock or options or anything like that, but this is being recorded on January 10, 2023. So, if you’re listening to a recording or reading a transcript at a later date, please be advised those positions may have changed.

Jacob welcome. Thanks again for joining us. Let’s jump right into it. So, product tanker markets, I mean, we had a monumental 2022. And in fact, it was far ahead of what I expected to see for the year. Of course, there were some reasons behind that. How are the markets looking now? It seems like the rates have been a little bit choppy, some of the stocks have pulled back a lot. What does the current spot market look like for you guys?

JM: Yeah. You’re absolutely right. I think we can see in equities that the crude tanker names have come down and with it also product tanker names. And I think there is probably at least from what we can see, there is two different reasons driving it on the crude. Clearly, with the Russian crude oil being sanctioned by the EU, I think there were some expectations that could lead to higher rates were clearly that has not been the case at least for the largest vessel classes.

Whereas on [clean] [ph] is a little different, you know, the market actually, sort of ended 2022 on a high and has softened considerably locally, especially in the U.S. where we saw that the U.S. Gulf markets have come down on the MRs as you point to, from, let’s say, 50 to currently around 20. So, that’s a considerable drop in the spot market.

And the rationale behind that has been that there has been, as I’m sure, some of you on the call have experienced that there has been unusually cold weather over Christmas, New Year in the U.S. Gulf and that led to that preemptive the refiners shutdown. The production and actually just before, just pre-Christmas, about 3 million barrels capacity were turned off out of the 10 million barrel capacity or so that is installed in the U.S. Gulf complex.

So, that’s a considerably down turn, compared to the normal production of refined products in the area and it’s only this week that we expect it to come back. So, I think the reason behind this softening in rates is clearly temporary.

J: Yeah. It certainly sounds like that, at least that’s the picture you’re painting. A lot of us are really looking towards this, this Russian product price cap and in the transportation ban. My understanding is, it’s going to start February 5, which is less than a month away. What’s the expected impact? What’s that going to do for the product tanker market? What are the net effects there?

JM: Yeah. So, I think, we’ll let’s maybe take a step back and think it through from the perspective of what has it been the dependency in the EU historically on diesel from Russia into the EU. And there, what we’ve experienced over the last 12 months is that, that Russian’s share of all the products that are going into Europe has fallen from about 40%, 50% to probably now closer to 30%, 40% as we speak. But you still have to, as you point to, you still have to think through that is going to fall further all the way down basically to zero, only in one month’s time.

So, what we have seen so far is that the missing volumes from Russia, they have been coming from Middle East, India. They’ve been coming from as far as way as Asia, and they’ve also been coming from the U.S., Gulf. And when you look at it a year ago, at that time, there were zero volumes coming from Asia. There were, like, [nettable] [ph] volumes coming from the U.S. And the main, the lion share of diesel imports were really coming from short sea from Russia. So, it’s an – already today, it’s a significant change in the trade and the recalibration of the trade. And there’s more to come is the point.

So, you’re probably half into this trade recalibration. There simply needs to flow more cargoes, especially from Asia, India, but also from the U.S. into Europe to satisfy the need for diesel products. So, the exact net effect is a little difficult to calibrate, but I don’t think that’s the important thing. The important thing for us at least is that this is for sure another leg up in the demand on product tankers on a ton mile basis.

J: Yeah. It certainly makes sense. I mean, you’ve laid out a pretty clear case for that. I just, you know, I can’t help, but see some parallels with the crude tanker market. And as you know, there’s this massive scramble, right? There’s this huge run up into November ahead of the $65 cap, which, of course, isn’t much of a cap anymore, but at the time, right, there was a price cap, the insurance ban, all that stuff. And then once that happened, right, once the actual catalyst happened, it was sort of almost sell the news, right, all the crew tankers faded. They’ve started off the year really flat footed. Is there a potential for a similar thing with product tankers where, you know, maybe we do get another spike here in a couple weeks, but then we get to February and March. And things kind of fade back down, is that likely?

JM: I don’t think that there is a parallel story here because on the trade recalibration that is needed to be done on diesel there is simply no magic bullet for the EU to satisfy its needs for diesel products. It needs to come from further away, it’s not a temporary thing. And you can’t, like, regauge a different trade pattern than one that I laid out and that we are already seeing. So, no, I don’t think this is – I think this is a long-term thing.

The Texas freeze caused a temporary step back in the market because there is no volumes being produced. That’s temporary and that’s short lived, but the longer-term around, I think both the Russian volumes not coming back as a substitute opportunity for EU to look that way. That’s a longer-term trend. And at least for now, we are also actually into the China is potentially going to benefit the product tanker market even more with the latest quarters that are up 46% year-on-year in the first batch of export licenses for clean products. So, I must admit that I don’t really see any parallels between what is taking place in the crude tanker market and the product tanker markets.

J: Yeah. It’s interesting. I’m glad you brought up the China quotas because I was also very intrigued by – over this last weekend, China relaxed the last of their travel restrictions. They got rid of the quarantine, and the two markets that have really lagged in recovering post-COVID have been, of course, the Asian travel market, both business and recreation. And also, sort of the U.S. Europe, right, Transatlantic air traffic has been lagging. So, it’ll be interesting to see if that helps and that picks things up.

So, this has been, I mean, pretty bullish, I would say, right? Your commentary is very optimistic. I’ve been a little bullish myself. I think it’s important though to talk about the other side of the coin, which are the risk factors in 2023. So, you know, everyone’s focused on the global economy. I think, obviously, that’s a broad stamp, if the economy is bad, maybe tankers will be weaker, but what are some of the other risk factors? What are some things that could change in the market? Maybe a little bit more nuance that could be bad for product tankers?

JM: Yeah. So, I think in the short-end, it’s a little difficult to see that, that the global sort of trade of products can change its dynamic considerably. I failed to really see anything else than the macro or geopolitical strains that could come from the relations between, let’s say, between China and U.S. If the war on the ground here in Europe and Ukraine is somehow, I would say, a catalyst to further tension between U.S. and China. I think any, kind of sort of dent into global trade is not only affecting one-to-one consumption, but it will affect – in secondary, it will effect, for instance, raw materials like crude oil and refined products.

So, I think my biggest concern would be that, that we have an unstable geopolitical, I think, global environment right now. Small things can happen that none of us really predict. I think at least here in Europe, it was quite clear that even on the 23rd of February last year, if you took a poll with decision makers, I don’t think a lot of people would expect Putin to invade Ukraine the following day. And the same, I’m sure, if we did the same around Taiwan today. Not many people would expect it to be very likely that something will happen soon.

So, I think that would be my biggest concern, I don’t think that there will be a green transition that can sort of take away the demand in the ecosystem globally for refined products. I don’t find that likely in the short-term. With the EV uptake, is, you know, I expect it to increase this year and the coming years. I still don’t think that it will make a dent in, sort of the fact that we are still highly dependent on oil globally for the coming years. So, I think the short answer is that I don’t think there’s any sort of fundamental economic reasons for the product tanker market not to have another leg here. I think it would be that the dark horse would be geopolitical tensions that none of us can predict.

J: Yes. So, sort of the kind of general broad systemic risk, right? Geopolitical risk, global economic risk, that sort of thing. No. That makes sense. And I mean, I think that’s on every investor’s mind, especially the broad economy, but I think all shipping investors, of course have been watching the China tensions very closely, right? And we won’t, you know, get any further on, on parallels, of course, Ukraine is a land war and Taiwan is much more, much more complicated and, of course, Ukraine is not going well for Russia, but yes, definitely a risk.

So, let’s pivot a little bit and talk about capital allocation and talk about TORM specifically and how you’re going to handle 2023. So, we’ll start first, I think with the balance sheet and the leverage because that’s, I mean, that’s foundation you build your house on, right? And last year, the market was very strong. You did a mixture, right? You pay down a lot of debt or at least reduce the net debt because of your strong free cash flow, towards the end of the year, you shifted into heavy shareholder payouts. During 2023, I mean, your net debt to assets is like 22%, 23%, 24%, is there a need for any more deleveraging or do you think it’s basically 100% payouts at this point?

JM: So, just to correct you a little, I think our net LTV is somewhere low 30s, that’s at least how we look upon it. And I don’t see a need to aggressively further delever. Obviously, this is a time where you want to harvest. And we will continue to do that alongside of making, you know, fleet renewals because clearly, if we standstill with our fleet, it would mean that over time we would become irrelevant to our customers because of an 18 fleet.

So, we need to – even in this environment, we just need to be constructive around some smaller refinements of our fleet on one side, keeping, as you point to our debt, I think, around this level in the upcycle that is very comfortable. And then it will at the end of the day, lead to a substantial amount of free cash that can be allocated to shareholders in terms of dividend and/or share buybacks, I mean, respective depending on the situation. So that’s what – that’s the way we that we look at this.

We did do a revamping of our distribution policy back in May of last year. And there is a very almost simple formula where it’s our free cash end of each quarter or a specific threshold. There we are, the board, at least, has a policy where we would be distributing out. And currently, my expectation will be the distributions would be in terms of dividends rather than share buybacks.

J: Yeah. Certainly makes sense. Just a quick clarifying point to make sure we’re on the same page. You mentioned LTV in the low 30s. I think I mentioned net debt around 20% or so. I was referring to net debt, like, excess cash.

JM: Oh, sorry. Yeah. You’re absolutely right.

J: Okay. Yeah. We’re on the same page. I mean, so 30% mid-30s loan to value, which is just the debt versus the ships, the gross debt and then 20% net debt assets, very low leverage. So, we have a strong balance sheet here. We all agree on that. First of all, I got to congratulate you on the distribution policy. I mean, that was fantastic. I mentioned at the start of this recording, you know, 10 January here. I do not currently have position but TORM was a massive winner for us overall at Value Investor’s Edge and myself personally, and a lot of that was due to your excellent dividend policy. So, thank you for doing that.

I want to ask about repurchases though because we’re getting to a point where the stocks have faded back. They’ve gotten cheaper again. I’m getting ready to get back in the TORM, hopefully, but we’re at the point where repurchases start to make more sense again, right. Because when you’re at 90%, 100%, 105% NAV, you might as well just pay a dividend, right? But when you start getting into these discounts, it can be more accretive, right? It can be better for long-term shareholders to do a repurchase. So, how do you think about that? Is that the right framework or is there other consideration?

JM: Yeah. Clearly, if there is a significant correction, I think in our case, for this 15% or so, which is in-line with the broader – with the broader markets that I described also in the beginning of where shares in the tanker space have, sort of settled right now. I think if it’s this magnitude, I don’t think we will look that way, but clearly, when we make the decision, of course, we will look as you point to. We’ll look at what is the environment, what is the actual price at that time? And if the gap increases from here. Yeah. Of course, we can do share buybacks.

What I really like, I mean, thanks for commenting on the distribution policy, which we actually spent quite some time to think through when we did it and we’ll stick with that one, but another point that have, sort of developed over the last year is that liquidity in our stock has increased. And of course, we really don’t want to take a step back on that. And with the free float that we’ve got, of course, buying back stock would create potentially a dent in the volumes that we have in our stock. So, that’s sort of the flip side to this discussion is that we like as a company to have a stock trading that you can, as you point to, go in and out of as prices develop and as your own portfolio develops. And I think that’s important also for us to maintain this liquidity in the stock.

J: Yeah. I certainly understand that consideration. And I think, you know, that’s more of a nuance when you trade it let’s say, 80% price NAV, and it’s a little bit of a gain there to repurchase, but you care about the liquidity. Obviously, if you trade at, you know, 50% price NAV, then…

JM: It’s a different game, yeah.

J: Of course.

JM: I don’t expect that to happen anytime soon, to be honest, but then we’ll be there. I can assure you. Yeah.

J: Yeah. I mean, I certainly well, no offense. I kind of hope it happens so I can buy some, but we’ll see what happens at Jacob. So, you know, that that brings up a good point because you talked about the thinner flowed and the priorities of share liquidity and in the past, right, two or three years ago, TRMD on the U.S. listing was investable. It was untradeable. It just – there was no volumes. So, yeah, there’s been tremendous progress there.

Look Oaktree is a cornerstone investor of yours since the restructuring. They own a massive piece of, of your equity. The float is very small because of Oaktree and Oaktree has been great, right? But at some point, they’re going to want to trim. They’re going to want to take some profits, and perhaps, right, there might be some sort of synergy where your stock trades, I don’t know, 80% NAV or something. And there could be a win – could there be a win-win?

I guess it’s a leading question, but could there be some sort of appetite for doing like a tender offer or doing some sort of private takeout of part of their position, right? That way, you’re building value, you’re allowing them to exit a little bit, and you’re not hurting your float whatsoever.

JM: Yeah, you could say that, that’s, of course, also a way that we have – that we looked at it in the past. Currently, what I am focused on is really the cash flow that we are generating, the operation that we’ve got and just really focusing on delivering these values that I’ve not tried in my career at least. So, we are benefiting – our shareholders are benefiting and that of course also goes folks. And then I think in the longer-term, it’s up to them to decide how they will how they will play this.

J: Yeah. Certainly. And, of course, you know, they’re smart investors and they can see the same macro conditions and micro conditions that you and I see, and they understand, you know, NAV as well. So, I’m sure they’ll take their time or at least we hope they will. So, you know, I think we’ve covered, you know, shareholder returns pretty well. I think most investors are happy or will be hopefully even happier next year. Let’s talk a little bit about the asset plays. Is there any appetite here to buy some ships or inverse? Is there any appetite to maybe divest a couple of your older ships?

JM: Yeah. I think we – that’s what I pointed to also. So, thanks for bringing that up. That I think with our fleet of currently standing at 78 vessels. I mean, at any given time, we need to think through how we, sort of play the assets. And clearly, right now, we would like to maintain the exposure that we’ve got to the spot market. We are basically 100% spot oriented on all of our fees. So, we’ve got a lot of flexibility and a lot of freedom of choice. But we, of course, also need to think about our customer needs.

And so, I think you should expect us to – as we did last year. Also in this year, I’m sure there will be opportunities to switch a little on our fleet maybe as we’ve done over a number of years selling out of slightly smaller older vessels like we exited the Handy segment last year. And then putting some of our hard earned cash into larger ships with the LR2s or LR1s. I think that’s sort of the general trend that you should expect also in 2023. But nothing dramatic at these levels, but some good deals that can – that can be cash, cash generative for a longer time on, on the platform.

J: So, kind of building upon that, looking at the LR1s and LR2s, what’s the specific, sort of age profile that looks interesting to you? Is it modern, eco-design? Is it some of the vintage stuff? Is it potentially a new build or a new build to resale. What’s kind of, if you’re going to you know, obviously, I’m not holding you to this, but if you’re going to buy a couple of ships today, what sort of age profile would you be looking for?

JM: Yes. So clearly, not newbuilds. We’re not fans of looking in that direction with the lead time. And the risks that would be involved and obviously also the CapEx that you would need to put on the table already now. So, I don’t think that’s not for, for general vessels. That’s not where to look. If you then look at where do we think that you got the best earning potential, then I don’t think it’s the very old vessels. So, it’s probably due to sort of mid-aged vessels that could – that we could have some appetite for where we got the transparency on delivering now or, you know, whatever time you are in 2023 and that you’ve got, I would say, some transparency also about your earning power.

J: Yeah. Certainly, you mentioned lead times on, on the new builds, and that’s been something, you know, we’ve been looking at and discussing a lot. I’m curious to pay, right, January 2023, if you went to a moderate to high quality yard and ordered either an MR, say MR2 or let’s say an LR2, right? I imagine the lead times are different. What sort of delivery windows could you get for those ships?

JM: Yes. So, it depends a little, as you pointed, it depends a little on the quality of the shipyard. But let’s say the Tier 1, shipyards are probably into 2026. And if you are willing to try a little untested territory for shipyards that have not maybe as much experienced as a Tier 1, you probably look at the back-end of 2025. That’s – but I think that the really fascinating thing for me having, having now worked more than 30 years in shipping.

You know, you’ve seen so many times that shipowners are themselves tripping them by contracting new ships when times are good. And we have to admit that currently here in the third quarter, fourth quarter, I expect that all of the product tanker names that you can mentioned, listed companies that they will be making historically the best results that they have done.

And that in a normal context, you would see that there would also be a rush to the shipyards. To sign up for longer dated vessels at lower prices than what you need to pay right now. And that actually in 2022 is fascinating that we’ve had this, basically, the strongest market in, in the history of the product tanker market and at the same time, the new contracting has been modest. It’s not even been – it’s been at levels like post-Lehman levels, which is fascinating.

And I think that’s the thing to follow here for all of us, whether we are in the industry or whether as an investor is to look at how much new ordering is taking place. And as long as we are in a situation where that is modest, it leads to a situation where the demand side will be the dictating of the trend in the underlying freight and not a lot of vessels and a search in deliveries two or three years down the road.

So, that is actually the data point that I’m following the most is that currently we have a record low order book of 5%, but the new orders that came into 2022 were lower than the year before. And that’s, of course, because two things, prices have gone up, and delivery lead times have also gone up.

J: Yeah. I think, you know, that makes sense because on one hand, you know, it’s baffling that there’s no new build orders or at least there’s very little new build orders in a strong market, but, you know, then you think about it and it’s like, well, you know, I’m not going to get this vessel until 2025, right? And I have to pay, you know, top 10, 20 percentile of value for the ship, right? So…

JM: Exactly.

J: In a bet, you’re making a bet two and half years in the future versus, right, if you’re bullish on the market, you could just buy a modern eco design, right?

JM: Yeah. I think we tend to play, and I think, of course the pricing in the market will also demonstrate that. I mean, it’s just much better and I think more sensible as an investor to look at the vessels already on the water rather than adding to problems further down the road. And of course, the fact that a new vessel, let’s say, that you get it in 2025, useful life takes you almost to 2050. And that’s when, when at least if we look in the broader context of things that you would like to be closer to net zero and we have to admit that a product tanker vessel is not very useful in a net zero emission environment.

So, there’s also – there is about that you’re getting closer to that assets that you purchased, just standard assets that you purchase as new ones without any special, I’m going to say features capabilities to go zero or to go green, can become stranded assets in the longer run. I think that is also influencing on people’s decision making right now. That is not the same decision as in let’s say in year 2000. This was not a discussion when you were anticipating to take a lower priced deferred asset to the market because nobody were, at that time, debating whether it would be an obsolete asset 25 years later.

J: Right. That’s a great point. I mean, just thinking about this as an investor, the last thing I would want to buy is a new build tanker for delivery in 2025. I mean, regardless of how bullish the market is, I would just buy the stock, right? That stocks are trading below NAV. And NAV is below the new build parity.

So, you know, it’s crazy. So, you know, I’m going to hold you the one thing though, Jacob. You made a bold claim. You said that even a middle tier so let’s say, like, a mid-tier Chinese yard ordering an MR. So, a midsized vessel at a mid-tier yard, you said mid to late 2025, is that – I just want to make sure I’m hearing that correctly.

JM: I think you can find. We wouldn’t, it’s not a yard that we would consider, but I think you can find yards that, that would be able to produce it. Yeah.

J: Right. But you’re saying that’s the earliest is middle of 2025?

JM: Oh. Yeah. That’s the view of this. Yes.

J: Yeah. I don’t know. I’m skeptical, Jacob. Because you know, where there’s a will, there’s a way. I’m skeptical that, you know, we won’t see some new build orders for, you know, Q1 2025 or Q4 2024. But, hey, if you’re correct, that is just mind blowing. And I’m not saying you’re wrong. I’m just skeptical because, you know, I’ve seen – we’ve seen this before, right? Ship owners with their own work streams.

JM: If you guys have a problem because the yards got an appetite for something else than catering to product tanker owners.

J: I’m sure all the product tanker owners love the containers, container sectors!

JM: Yes. And the fact that they made hay before product tankers is not bad for any of us.

J: So, a couple of niche follow ups here, right that that I had for you, Jacob. One of the questions, you know, one of the standard practices is that new build VLCCs they often have a maiden voyage, right, where they carry some diesel or something like that out of China. Has that been much of a factor in the past in the last few quarters? Do you see that changing going forward? I know that VLCC deliveries are going to fall off a cliff here soon. Is that going to help or is that just kind of a rounding error?

JM: I think it is helpful that there’s not that many VLs coming because as you point to, if you’re a trader and you can – I’m going to say build your position up against a new building VLCC, and you can take on a maiden voyage, you know, a VLCC is taking away up to three LR2s that would do the same job. So, clearly, whenever there is fewer VLCCs coming out of the yard that is beneficial for LR2 trade. But it is – in the current environment, I think it’s just on the margin, whether it matters. I mean, just look at it. We’ve been ramping our LR2s in Asia anywhere between, let’s say, $60,000 and $90,000 over the last month or so. So, it’s not like, you know, even if there is three deals, being booked. It’s not dramatic. What matters right now is not so much the supply. It is the demand side that is driving this market.

J: Yeah. I think that’s been clear. And well, of course, we’ll have to see how that transitions with the upcoming Russian product ban, and we’ll see if it’s – I hope, you know, you mentioned that it you’re a little bit more bullish on that than the crude tanker side, but I know folks are kind of on edge, right? Because the crude tanker market has been, I don’t want to say disappointing, right? But it’s certainly pulled back from the heights we saw in November there.

You know, one question, I think it’s overarching. I didn’t want to lead too much at the start, but I think it’s worth as we’re closing up here and we’re thinking more about risk factors and we’re making sure that we’re not getting too bullish on the product tanker market. We should all hope, of course, in the next year or two. We should all hope that Russia and Ukraine can settle down. They can find some sort of resolution. The Russia will decide that aggression is the wrong strategy, right? And there’ll be some sort of, you know, peace however that might be, right?

And, you know, a lot of folks are looking at the product tanker market, and they’re saying, this is only strong because of the invasion of Ukraine. And you know, whether or not there’s merit to that, what does the world look like? Let’s say, let’s be optimistic and we’ll say that sometime this year, sometime in 2023, the Russia, Ukraine conflict somehow gets resolved. Let’s just be optimistic and say that’s the case. What does that do to the product tanker market? I mean, it’s going to completely reorient things back to where they were, right? I mean, what does that mean for your demand picture?

JM: Yeah. So, I share fundamentally, you all hope that there will be a sensible solution to a war that is totally unnecessary in Ukraine. However, your comment around that that will, sort of change the situation for the product market, if you have a peace, let’s say, solution on the ground in Ukraine. I don’t agree with that part because I don’t think that there is a one-to-one around peace and then about sanctions.

I would be very surprised if U.S. and EU in the administration in the U.S. and also in EU that the political leadership we say, hey, now there is peace. This means that we will now shake hands and do business with Russia the way we did pre-invasion. I have a strong belief that that is not the case. So, I don’t think that you will turn the clock back on the fact that you want to release yourself from being dependent on any, kind of commodity trade with Russia.

J: Yeah. Certainly something to watch this year. We hope I guess they are threading the needle for the product tanker segment, right? Is that there is peace or there’s some, sort of armistice and there’s something that works out, but the trade flows themselves remain as they are, right? And that could certainly be the case. I don’t want to, you know, get too much into prediction, right? It’ll certainly be something to watch. And I think there is a certain needle there to thread where you hope for the best on the ground, but you’re still bullish, right, on product tankers?

JM: Yeah. But I think – just on that, I just want to make absolutely sure that I really hope that there is – that there is a solution. I also with the insights that we’ve got with the political, I’m going to say, insights and the analysis that we are doing constantly and the context we have. I don’t think that the political leadership in U.S. and EU. I want to make it absolutely clear. I don’t think that they will take a step back and shake hands with Putin following peace and say yes, now we reopen our gas and now we reopen for your oil and energy. That dependency is not coming back.

J: If nothing else, you know, this was a huge wake up call, right, that the Europe dependency was way overboard. So, I don’t want to get too much in the politics, of course, but certainly a different world that we live in today versus just what three years ago, right, completely different world. So, Jacob thank you so much for joining us this morning, for taking some time out of your schedule. I do want to give the last word to you before we close out, you know, why – there’s a lot of product tanker stocks. There’s a lot of crude tanker stocks. There’s about a dozen of them total. Why should investors consider you, TRMD on the U.S. Stock Exchange? Why should they consider your stock versus one of your peers? Why is TORM the place to be?

JM: I’m sure that there is other prominent names that are totally investable, but I think that the consistency, the transparency, the governance in TORM or time has a very proven track record. And then I think that the clear alignment of interest from the cash flow generation that we expect or potentially have. And then the shareholder return, so that makes it for, I’m going to say for a compelling investment case.

J: Yeah. Let’s hope next time we talk, we’ll see a much higher price on the stock and very strong – very strong rates.

JM: Thanks.

J: This includes another iteration of Value Investor’s Edge Live exclusive interviews within the shipping industry. This is recorded on the morning of January 10, 2023 at about 8:00 AM Eastern Time. As a reminder, nothing on the call today constitutes investment advice or forward guidance of any sort. If you’re listening to a recording or reading a transcript at a later date, please be advised positions may have been updated.