Ardmore Shipping poised to benefit from favourable market fundamentals

The product tanker market started on a weaker note in 2022, but firmed up with Europe’s attempt to reduce dependence on Russian energy supply (including refined petroleum products) against the backdrop of increased tensions between Russia and the West. Vessel earnings of product tankers on key trading routes across vessel classes were on the rise from March with product tanker earnings
substantially higher than their break-even rates. The impact of strong freight rates was reflected in the rally of product tanker stocks over the past eight months that led to a surge of 292.5% YTD in the Drewry Product Tanker Equity Index. Ardmore Shipping’s (ASC’s) stock price also generated a hefty return of 319.2% YTD as the company benefitted from substantially high spot earnings of MRs and
Handysizes coupled with ASC’s high exposure to the spot market.

Although vessel earnings of product tankers are expected to normalise to some extent over the next six months, we expect day rates for these vessels to remain higher than their break-even costs between 4Q22 and 2024. Limited growth in supply of product carriers till 2024 coupled with rising long-haul trade of refined products from India, the Middle East and US to Europe will drive the top line and profitability
of ASC which is expected to create shareholder value and support an upside in the company’s stock.