Okeanis Eco Tankers Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: In Q2, OET delivered a fleet-wide TCE of $50,500 per vessel per day, reported adjusted EBITDA of $47.3 million, net profit of $26.7 million (EPS $0.83), and declared a consecutive dividend of $0.70 per share.
  • Positive Sentiment: The company repurchased its three Chinese-leased vessels and refinanced them at 55–60 basis points lower margins with extended seven-year maturities, yielding ~$1 million in annual interest savings and reducing cash breakeven by >$1,000 per vessel per day.
  • Neutral Sentiment: OET's balance sheet ended the quarter with $65 million in cash, $631 million of debt, 57% book leverage and an approximate 40% market-adjusted net LTV, reflecting solid liquidity and moderate leverage.
  • Positive Sentiment: OET operates a young, eco-designed fleet of 14 scrubber-fitted VLCCs and Suezmaxes (average age 5.9 years), achieving 100% utilization and flexibility in market positioning.
  • Positive Sentiment: The tanker market outlook remains supportive with structural supply tightness from an aging shadow fleet, the return of OPEC barrels, and firm Suezmax rates, underpinning optimism for Q3 and Q4.
AI Generated. May Contain Errors.
Earnings Conference Call
Okeanis Eco Tankers Q2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Welcome to OET's Second Quarter twenty twenty five Financial Results Presentation. We will begin shortly. Aristides Alefuzos, CEO and Ehraktis Varunis, CFO of Okeanis EcoTankers will take you through the presentation. And we're pleased to address any questions raised at the end of the call. I would like to advise you that this session is being recorded.

Operator

Herak, please begin the presentation now.

Speaker 1

Thank you. Welcome everyone to the presentation of Okina's EcoTankers results for the 2025. We will discuss matters of the forward looking nature and actual results may differ from the expectations reflected in such forward looking statements. Please read through the relevant disclaimer on Slide two. Starting on Slide four and the executive summary.

Speaker 1

I'm pleased to present the highlights of the 2025. We achieved fleet wide time charter equivalent of about $50,500 per vessel per day. Our VLCCs were almost at $50,000 and our Suezmaxes at $51,500 We report adjusted EBITDA of 47,300,000.0 adjusted net profit of $26,700,000 and adjusted EPS of $0.83 Continuing to deliver on our commitment to distribute value to our shareholders, our Board declared the fifteenth consecutive distribution in the form of a dividend of $0.70 per share. Total distributions over the last four quarters stand at $1.82 per share or approximately 9% of our earnings for the period. On Slide five, we show the detail of our income statement for the quarter and the 2025.

Speaker 1

TCE revenue for the six month period stood at $113,000,000 EBITDA was almost $80,000,000 and reported net income was over $39,000,000 or $1.23 per share. Moving on to Slide six and our balance sheet. We ended the quarter with $65,000,000 of cash. Balance sheet debt was $631,000,000 Book leverage stands at 57%, while our market adjusted net LTV, basis the most recent broker values, is around 40%. On Slide seven, we go over our main driver behind our operational and commercial performance.

Speaker 1

That's our fleet. We have a total of 14 vessels, six Suezmaxes and eight VLCCs with an average age of only five point nine years. That's the youngest fleet amongst listed crude tanker peers. All vessels are built in South Korea and Japan, are scrubber fitted and eco designed. From a capital expenditure perspective, we're in a very good spot with only our two twenty twenty built Suezmaxes scheduled to undergo their five year dry dock at the end of the third and beginning of the fourth quarter later this year.

Speaker 1

In 2026, we only have one Suezmax for the entire year. Slide eight, moving on to our capital structure. In May, we announced that we declared the option to purchase back our three Chinese leased vessels, the Nissios Nikuria, Nisios Kea and Nisios Anafi. Denisios Nikuria and Denisios Anafi have been refinanced with a Greek bank at very attractive terms priced at 140 basis points over sulfur, seven years maturity and competitive amortization profile. The Kea has been refinanced with a syndicate of Taiwanese banks led by Isan at similarly attractive terms, priced at 135 basis points over sulfur with seven years maturity and also competitive amortization profile.

Speaker 1

The Nissos Nicuria and the Nissos Kea transactions closed in June within the second quarter, while the Nissos Anafi closed last week at the August. With respect to the Nissos Nicuria and the Nissos Kea, we recorded in our second quarter P and L a non cash, non recurring write off of the unamortized portion of the previously recorded modification gain of approximately $1,100,000 This relates to a noncash modification gain recorded in 2024 under our IFRS accounting policies due to the amendment of the then applicable terms and reduction of margin negotiated with our financiers. No such modification gain was recorded to Deniso Sanafe. As such, we do not expect a similar write off in the third quarter. These recent refinancing transactions underscore the strong confidence our financiers have in OKA and NIS and the resilient, well balanced capital structure we have built.

Speaker 1

They have lowered financing margins by 55 to 60 basis points, extended average maturities by roughly one years point per vessel and further strengthened our cost efficiency. We expect to realize annual interest savings of around $1,000,000 in the first year alone, while reducing our daily cash breakeven by more than $1,000 per vessel per day. Our loan maturities are now staggered between 2028 and 02/1932, and we are set to soon turn our attention to declaring and refinancing the last of our legacy leases on the Nicos Aires De Sportico in the first half of next year. If our last transactions are indicative of what we can achieve, buying back these two vessels will present a compelling opportunity to deliver another meaningful improvement in our capital structure and drive breakeven costs even lower. Before passing it on to Aristides, taking the opportunity and as we have been going through the highlights of the quarter, since our last call in May, I'm pleased with the further expansion of the universe of equity leases coverage on our name.

Speaker 1

In the spring, the DNB merger with Carnegie closed, effectively getting us covered by the combined team. And recently, we had our second U. S. Analyst, Jefferies, initiating coverage. As we continue our work to expand our investor base and sell the story of our vision of becoming the public platform of choice within the crude oil tanker space for investors and other stakeholders, these are important milestones within our still young journey in the public capital markets.

Speaker 1

So thank you to the teams of the new and older analysts and the work that they put. I will now pass the presentation to Aristides for the commercial and market update.

Speaker 2

Thank you, Ecle. Q2 was a clear improvement from Q1. We had a fleet wide TC climbing over 12,000 per day quarter on quarter. We had 100% utilization in both our in the segments we own on the VLCCs and as soon as MAXs. And I think what made the difference this quarter is how we used the fleet's flexibility to adapt to the market dynamics of that quarter.

Speaker 2

On the VLCC side, we kept our balance of east and west positions while capitalizing on front haul voyages from the West to the East to lock in strong earnings. We fixed two vessels to go east on these long haul voyages, which were profitable, and then fixed them after they discharged in the East on, again, profitable westbound backhauls. We fixed another from Guyana to the Far East at attractive levels. And importantly, we cleaned up another VLCC that loaded diesel in the AG for discharge in Europe at attractive levels. And that gave us a dual benefit of strong earnings on the voyage itself as well as optimizing back in the West ahead of Q4.

Speaker 2

So we put a lot of focus on both fixing ships to come from the West to the East that we positioned to lock in these, like, strong front haul earnings, but we need to keep bringing ships from the East to the West when we find attractive opportunities to keep this fleet balanced. And either we do that with backhauls from West Africa to to Europe or with the cleanup voyages that we've really successfully been able to do, systematically over the past year. On the Suezmaxes, once again, we outperformed our VLCCs on a dollar per day basis, And we focused heavily on trading them in the West, in Europe, West Africa, and using triangulation and vessel substitution to keep the ships full and moving the South Isle Basin. These tactics allowed us to capture strong stronger earnings where possible and keep the fleet fully employed throughout the quarter. As Hideclyst mentioned earlier, we achieved a fleet wide TCE of 50,500 per day with $49,800 on our Versus and $51,400 on our Suezmaxes.

Speaker 2

And now moving into Q3. The market has eased compared to Q2, although we had brief spikes that were more on paper like the brief war with Iran. And this is a seasonal low quarter anyways, and the outlook remains very healthy and optimistic looking towards Q4. As of today, we fixed 77% of our RVs in the spot market, which they all are, at $44,200 per day and 6060% of our Suezmax days at 34,200 for a fleet wide fleet wide average of 40,800. The current Suezmax market, though, is very firm, and we are either in the process of fixing or we'll shortly fix voyages that are far higher rates than our Q3 guidance.

Speaker 2

So that's looking good, and we're excited about these one, two, three voyages that we have coming up. On in Q3, our approach has been to maximize earnings given it's a summer period and also keep this geographical balance that we like. On the Versus, that meant staying in the East if we felt that the t d three or local east runs outperformed what we would expect to turn on a triangulated basis. So we did fix multiple, you know, AG East voyages. Alternatively, when we did find backhaul opportunities for vessels opening in the East that we that earned similar to the TD three round voyage, we jumped on those fixtures and took them immediately.

Speaker 2

And that also allowed us by bringing one ship from the East to the West to fix another ship that we had in the West to come east and lock in good earnings. The benefit also of these longer voyages that will, you know, fixing east and west and west and east is that if we do them in July or August, the vessel opens up in Q4. And hopefully, this Q4 is a lot longer than last Q4, which is quite disappointing. On our Suezmaxes, Nissas Sinos and Nissas Sinos have been fixed to to go east for their scheduled dry docks, and they picked up long haul voyages on

Speaker 3

the way with minimal ballast.

Speaker 2

The dry docks are expected to be just below twenty days. Yadakiris mentioned, they'll take place in September and October. For the remainder of the fleet, we capitalized on the seasonal market softness by executing, you know, short duration voyages in the West, which we like on the Suezmaxes. We can swap them in. So if a ship is a little bit late or early, we can swap in another ship to optimize ballast and waiting time.

Speaker 2

And this really gives a big difference to earnings if the voyage is assured and you're able to limit these two factors. Now going into in September, with OPEC now beginning to unwind production cuts, we expect additional barrels to come into the market and this to lead into higher utilization of tankers. We'll come back to this a bit later, but we're quite constructive looking at the market for the next quarter. Moving on to Slide 12. We continue to outperform the market in our peers with our modern fleet and very strong chartering team.

Speaker 2

As we mentioned before, the gap widens when the market turns as we can use our nimble fleet to position quickly and take advantage of short term opportunities. I think this is a benefit that having a smaller fleet has that a larger fleet can't do, And it allows us to deliver consistent results above our peers. Moving on to Slide 13 and the following slide. We've kept it quite short since it's August to talk about the market. We keep coming back to this slide because it tells one of the most important stories of our segment, that the supply side remains structurally tight, especially on the large vessels.

Speaker 2

It's not just about age or order book. A large part of the fleet is in the shadow trade, and we believe it's almost impossible for these vessels to return to normal trading and compete with modern and compliant tonnage. Most of the sanctioned tonnage is also over aged, meaning at some point, even this subsegment will require replacement, and that replacement will have to come from the conventional fleet. This is again positive for compliant vessels like ours. By 2028, more than half of the VLCC and Suezmax fleets will be over 15 years old.

Speaker 2

Many of them all of them belonging to the non eco generation, fuel thirsty, less efficient and increasingly uncompetitive to our modern eco design fleet. Nearly 30% will have crossed the twenty year mark with only a modest number of newbuilds scheduled for delivery. This is exactly the kind of market backdrop that we position our vessels as a preferred choice for our charters. Meanwhile, the pace of new orders remains firmly in check despite some recent orders, reinforcing supply dynamic that we believe will be highly supportive for tanker earnings in the years ahead. Moving on to the final slide.

Speaker 2

On the overall demand and market dynamics, we continue to see a supportive setup for tankers. With September, Middle East cargoes expected to be released soon, momentum could quickly return. OPEC plans to fully restore the eight members 2.2 voluntary cuts by September with about 1,100,000 barrels returning in August and September. Moving this extra crude would require roughly 20 VLCCs or roughly 1.5% of the global tanker fleet supporting VLCC spot rates. In Guyana, Exxon has started production at Yellowtail.

Speaker 2

As announced last week, its fourth offshore development in the Starbrook block, and this is 250,000 barrels per day capacity, lifting the natural output capacity over 900,000 barrels. Brazil also came online and is exporting at the peak numbers as well. While much of this moves on Aframax and Suezmax over shorter distances, it is also a large VLCC trade. The additional volume still contributed positively to regional flows. Looking ahead to Q4, OPEC is weighing the partial reversal of the 1,600,000 barrel production cut.

Speaker 2

Excluding Russia's 5,000,000 barrel, bringing back roughly two thirds of the remaining cuts would add about 700,000 barrels, with Saudi potentially accounting for 5,000,000 barrels of oil. More supply from the region means more demand for VLCC to move back crude. On the geopolitical front, Trump has reportedly threatened tougher measures on Russia, including higher secondary tariffs on virus such as India and China, and has agreed to meet with Putin. Separately, the EU will cut the Russian price cap down to $47.6 per barrel in September, which is 15% below the market. And we'll have more regular adjustments to this cap going forward.

Speaker 2

The outcome of these moves remains to be seen but could materially shift trade flows as we've already seen with India. We've seen a material shift of their crude oil purchases and inquiries from The U. S, Brazil and West Africa. Just with a small example of our VLCC fleet, multiple vessels in our fleet have either been fixed to India recently or existing voyages on existing voyages, charters have asked for India discharge options. You know, this shows us that India is diverting a percentage of its crude purchases away from Russia towards U.

Speaker 2

S.-compliant crudes. And we find that this is very supportive of the ton mile structure. In Iran, closer monitoring of the shadow fleet could curb unsanctioned exports and redirect volumes to the conventional fleet. But we also have the Europeans' either threatening snapback measures, which seem to be due by the August. So we'll see if the pressure could return on their own as well.

Speaker 2

All of these factors reinforce our constructive outlook for the remainder of the year and beyond. And I'm handing back to you, operator.

Operator

Thank you. First question comes from Omar Nokta with Jefferies. Your line is open. Please go ahead.

Speaker 3

Thank you. Hey, guys. Good afternoon. Thanks for the detailed updates. As usual, very helpful color.

Speaker 3

Did have maybe just a couple of market related questions and maybe just perhaps on the Aristides, you referenced the VLCC that you cleaned up to trade diesel. Just in general, kind of could you give maybe an overview of what you think this vessel will do after this voyage? Will it continue in the diesel trade or the clean trade? And is it possible to maybe just give a sense of kind of what the economics look like in terms of the cost of cleaning it and then what you captured in terms of earnings relative to what you could have gotten had it stayed dirty?

Speaker 2

First of all, Omar, again, thank you for taking up coverage. It's nice to hear your voice on our calls as well. We've heard you on so many other calls that it's quite familiar. In terms of your first question on the on the cleanups, you know, we've been doing it for over a year now, and we've we've been fixing on a spot basis with two counterparties. We've developed a strong element of trust with the counterparties that we fix with where we clean up the vessels ourselves and proceed to load the cargoes.

Speaker 2

So the charter doesn't need to take get involved or or take the risk to clean up the ships. This gives us a unique ability to be one of the very, very few spot owners who is able to offer their ships, for these types of voyages, and we don't see it usually happen by anyone else. Otherwise, it tends to be on a time charter basis where the charter cleans the vessels for the for the trade. We have tried to fix the vessels once they've opened up after discharging in Europe with clean cargo for clean business, whether it's a US Gulf to Europe or some kind of voyage similar, but we've never been able to. So I can say with 99% certainty that the ship will end up loading a crude cargo either from The US Gulf, maybe from the North Sea, maybe from Malta, but she'll load a a crude cargo and go east.

Speaker 2

Now on your on the second part of the question about the economics, so what what what we look at is two things. I mean, if the clean market is really strong and we can and TD three, for example, makes 40,000 just to to open in China, load an AG, and come back to China, makes 40,000, and we can earn 40,000 to go clean up in the AG, load the diesel, and come to the West, for us, that makes absolute sense because the next voyage will earn 60 or 70,000 when you load in The US Gulf, and the average will be far higher than whatever you earn in the AG. If the backhaul voyage doesn't earn as much as TD three, then we start looking at what the averages of, you know, a backhaul voyage plus a fronthaul voyages would make versus what t d three run would make plus one or two more t d three runs at, you know, what the paper curve is pricing or what our expectations for the market. And if we think that the back of the triangulated basis outperforms, we would choose that option. In general, triangulation has worked very well for us over the past three years.

Speaker 2

We've established our relationships with the backhaul players and with the fronthaul players, and it's something we like. But we're not fixed on it. So in Q2 and Q3, we fixed three, four, five voyages for local AG East runs when we found that it was more profitable to do that. Thank you.

Speaker 3

Thank you. Very again, very detailed. I appreciate you giving that overview. Okay. And then maybe just one follow-up and just in terms of, you know, OPEC.

Speaker 3

And you mentioned Suezmaxes have obviously done better than what you are guiding and we're seeing rates doing decently here recently. I guess maybe just big picture as we think about these OPEC barrels, there's been a lot of talk and a lot of expectations of this production increase. And it looks like what's being produced now sort of outpaces the typical summer cooling consumption in the region. And so it seems that we should be seeing some of these barrels actually hit the export markets fairly soon. And just from your vantage point, are you seeing any of that?

Speaker 3

Are you seeing any incremental cargoes coming out of The Middle East as a result of these OPEC boost? Or is it still some weeks away before we start to see that?

Speaker 2

Well, I mean, two and a half weeks ago, three weeks ago, TD three was at, you know, world scale 44, 45. And we made it up a couple days ago to 57 and a half. We've seen, you know, more than a 20% increase of VLCC rates. And this has been you know, the it's obviously there's a short term cycle where it's a reason that this happens. Know, the position lifted and closed.

Speaker 2

But the bigger picture is that, yes, these cargoes are coming back to the market, and at the same time that you also have the Indians diverting their supplies, supply acquisitions. So I think it's a multitude of factors, but this week was expected to soften a little bit on the VLCCs. That's what our team has felt. And yesterday was indeed quiet than the day before, but today was actually quite a bit busier on the VLCCs. And, we think that, you know, we made up to 57 and a half.

Speaker 2

It came off a few points. There's a view internally that it's bottomed now. And this only can be because there's more cargoes coming out and the charters aren't able to sit back like they would have in other times and pull the cargoes off the market to have the position list grow before they come back in. They clearly have more cargoes to cover, so they they they can't be as patient as they were. So I think that this is leading into an interesting September, where we could see further upside.

Speaker 2

And, I mean, the paper market is definitely pricing that as well. And the paper market, it's not it doesn't predict the future, but it is traded by the most important parties in the shipping market, who are the oil majors and predominantly the traders.

Speaker 3

Okay. Yes. Very good. Well, thank you. Appreciate that.

Speaker 3

And we'll see how things develop here. Thanks again, guys. I'll turn it back.

Speaker 2

Thank you.

Operator

We now turn to Peter Horgan with ABG. Your line is open. Please go ahead.

Speaker 4

Good afternoon, guys. The first question I have written was partly at least answered now after Omar's questions. But in terms of cleaning up, as you said, not many companies do that. But is it possible to say something about the levels, call it the spread between either the Versus or the Suezmaxes versus the MR rates that will put that trade into profits. Do you sort of need MR rates in sort of the high 20s, 30s?

Speaker 4

Or is it an inflection point prior to that? So the economics, as specific as you assume that you can be, please, in terms of switching.

Speaker 2

Hi, Peter. Thank you for your question. I think it depends a lot on each charter. So if if the vessel is able to load directly from the terminal and load the full cargo or load a majority of the cargo and then you limit the further FTS operation that's required, you really reduce the cost of the loading operations. And this is a cost that the charterer bears.

Speaker 2

If you're able if some of the charters who control the terminals and have berth that can load a VLCC, obviously, you're much more competitive than a trader who might have to buy five or six cargoes and load them individually by STS because then you need to pay for each ship that comes and the operation. So that that's a huge benefit. And then I think when does the deal make sense? Usually, when the clean market is high and the VLCC market is low because you need you need to have that arbitrage where it makes sense to use a VLCC. But you can have the VLCC market flying because then, you know, our alternative options will be too good.

Speaker 2

So, obviously, the the clean market needs to be firm. The VLCC market needs to not be relatively as firm, and the charter needs to be able to control the loading to limit its expenses. And the best way to do that is to discharge and load into terminals and avoid multiple FPS operations, which are expensive.

Speaker 4

Okay. And a follow-up on that topic. How much of your fleet is currently now doing clean or products? And how has that developed now over the past year roughly, so to speaking? We do remember.

Speaker 4

I I think well, I think at least I remember that. Was it six ships doing clean freight last summer at at one time.

Speaker 2

Yeah. I mean, right now, we had one ship in q two and one ship in q three, so it's not a big amount of the fleet. At times this year, we've had no vessels being on clean. So it really has to do like you said, there's an inflection point between diesel pricing east to west, MR, LR two rates, and VLCC rates.

Speaker 4

Okay. That's at least, well, very interesting to see that someone is capable of doing this on a spot basis. Second question, and I do know this is a very sort of difficult question, but I just wanted to hear your thinking around what could potentially happen now in the case of any deal between The U. S. And or Europe and Russia.

Speaker 4

I guess the big question is to what extent Russian barrels, both on crude and product, will return to Europe. But yes, just wanted to hear your thinking around that, yes, the coming meeting and

Speaker 2

what we follow-up. Well, I mean, the only thing that we know how to do well is fix ships or hopefully buy ships cheap. But from what our view is, I think that the bid ask between Ukraine and Russia is still very wide. There's clearly a very big interest from Trump to come to a deal, but I don't know if what Russia would currently offer would satisfy, Ukraine and the Europeans. So, I mean, I think that if there's a ceasefire, perhaps we could see something from The United States, you know, softening a bit on its sanctions.

Speaker 2

But I think that I don't see that Europe changing its policy anytime soon on importing Russian crude into the European markets or any removal of sanctions on the shadow fleet. I also don't think that there's any material risk of US removal of independently owned tankers in the shadow fleet. You know, may maybe there will be pressure for the, you know, Sokunflot, is the Russian state owned company. But, and that's a relatively small percentage of the shadow fleet, but I do not see, you know, The U. S.

Speaker 2

Rewarding independent owners who trade in the shadow fleet with sanctions removals. So I think that the ton mile effect of Europe not importing will remain. Perhaps we see some fuel or VGO going to The United States. But I think my base case is that Trump and The US remain frustrated in the medium term, and we don't see very much progress and potentially more strict sanctions coming.

Speaker 4

Okay. Thank you for your color on that. A final very sort of other sort of question in the end here. Looking into second half and also 2026, G is and now running at approximately 4,000,000 It's been, well, up and down a few times over the past quarters. But is this now the level that we should pencil in for second half and onwards?

Speaker 1

Let me jump in here. No, a rate of $4,000,000 a quarter is not should not be the base case assumption. Let me just say that over the last couple of quarters, especially in Q2, because a lot of our G and A and OpEx for that matter is expensed in euros, there's been an increase due to the exchange rate spike between the euro and USD. Of course, this is countered by an exchange rate swap that we have put in place, although this is below the EBITDA line. So there is a gain that you will notice through our interest rate hedge.

Speaker 1

Now setting aside the exchange rate factor, there is some seasonality on our G and A. I expect that half '2 will be will have a lower rate than what we had in half one. But of course, a lot of this is determined by the listing expenses that continue to creep up.

Speaker 4

And the final fourtwenty twenty six?

Speaker 1

I think it's a little too early to have visibility. My base case assumption would be consistent with both in terms of seasonality and overall level as we have this year, assuming that nothing crazy happens with the exchange rates. That would skew the figures. Again, we are significantly hedged, but you just don't see those numbers above the EBITDA line. You see them below.

Speaker 4

Okay. Okay. Thank you, Hirokus. Sure. That's all for me.

Speaker 1

Thank you. Thank you, Peter.

Operator

We now turn to Liam Burke with B. Riley Securities. Your line is open. Please go ahead.

Speaker 5

Yes, thank you. We discussed the unlikely event of sanctions being lifted, but the lifting of sanctions is always highlighted as a risk to the crude tanker sector. But even if sanctions were lifted, wouldn't that shift traffic away from the shadow fleet to the more conventional vessels and still put you in a win win situation?

Speaker 2

Hi. Thank you for your question. I mean, it's it's there's so many different parameters that it it's so complicated. And I but what what I one of the likely bullish scenarios that I see is that The United States allows and the price cap is removed, and it allows the trade to go on normal vessels again. But the shadow fleet remains sanctioned.

Speaker 2

And in terms of, let's say, the the Chinese and the Indian buyers and the utilization of ships, we've seen that OFAC sanctions are are by far the most effective at limiting utilization. But this is for the shadow trade. If we're talking about the compliant trade, you know, whether you're sanctioned by The U. S, The U. K, or Europe, it doesn't make a difference.

Speaker 2

And I think just an example is that the entire insurance market is controlled by U. S. And European insurance companies. No owner of a sanctioned vessel in The U. S, U.

Speaker 2

K, Australia will be able to insure their vessels or have classification or have a first class flag while have sanctions on them. And there's a very small overlap between sanctions of the EU, The US, and The UK. It has not been coordinated at all. So the fact that they're not over overlapping means it's very complicated for these vessels to to have you know, if The US removes sanctions, it doesn't mean that they still won't be sanctioned by the other two authorities. So I think, yes, there's many cases in the different scenarios of how sanctions a sanctions reduction scenario plays out that could remain very bullish for Tanger.

Speaker 5

Thank you. And your operating cost per vessel ticked up again this quarter. Is there anything unusual, or is it just your normal quarter to quarter variability?

Speaker 2

I'll let you at least answer because I focus on bringing in the money.

Speaker 1

I'll say this is focusing on running the vessels as best as possible and bringing in the revenue. So that obviously has a bit of an impact on OpEx. But I think the larger impact has to do with what I explained to Peter earlier because a significant part of our OpEx more so than other peers, I expect, to our crew composition is based on euros. The exchange rate does play a bit of an impact. So I think partially it's explained by that.

Speaker 1

Orest, it's just again seasonality. Overall, I think compared to last year, setting aside the exchange rate difference, we expect that the cost should be relatively flat, maybe slightly above, but nothing significant.

Speaker 5

Great. Thank you, Heraklis.

Speaker 4

Sure.

Operator

Now turn to Clement Mollins with Value Investor's Edge. Your line is open. Please go ahead.

Speaker 6

Hi, good afternoon. Thank you for taking my questions. My first question is also on the geopolitical side. You mentioned you're seeing a large shift in India's import preferences. Should this continue or even accelerate, where do you think the Russian volumes will end up?

Speaker 6

Do you think China would be willing to further increase its imports of Russian crude?

Speaker 2

Kermit. Thanks for your question. I mean, you know, I think Trump is able to use his power against certain countries to force them to divert their crude at the expense of tariffs or sanctions. And these are countries that are more your allies or your friends. And I think that, you know, Turkey and India are more susceptible to Trump's pressure.

Speaker 2

The Russian crude that is no longer being bought by the Turks and the Indians will have to be sold into China. They're the only other buyer of this crude. I expect that the Indians are price sensitive. So if we see a big decrease in the Russian pricing of their crude and, you know, the discount to others grows a lot, perhaps they buy a bit more again. But, the only other outlet of Russian crude is China.

Speaker 2

So Turkey, India reduce, China increases, and it's it's a it's a dramatic a dramatic effect to ton miles for that trade, which will we already see that it stretched the shadow fleet. The shadow fleet, the positions being up in the North are diminished. Rates in that market are rumored to have increased substantially. And as we go into the winter, I do expect that there will be more purchase inquiries for older tonnage to slot into that fleet and service that trade.

Speaker 6

Thanks for the color. And this one is more on the product side, but Europe is set to crack down on its imports of refined Russian crude, which was previously allowed. To what extent do you believe that's enforceable? And do you envision any impact on the overall market?

Speaker 2

Well, mean, the imports of Indian and Turkish products, it's a sizable percentage of the European clean product consumption, but it's nowhere near the majority. You know, it's a relatively small percentage. So I do think that trade flows will adjust. But it is complicated. You know?

Speaker 2

I mean, I I don't understand the workings of a refinery very well, but I assume that they have multiple storage tanks. I assume that they blend different types of crudes to produce the optimum output of different clean products, and part of that could be Russian crudes and, you know, issuing certificates for some crudes that some products that do or don't have Russian food inside is is is messy, and it's definitely nothing that's occurred in the industry so far. So we'll have to see how they how that's dealt with in the future. But it'll definitely be interesting to see it.

Speaker 6

Definitely. Only time will tell. That's all for me. Thank you for taking my questions and congratulations for the quarter.

Speaker 2

Thank you. Hopefully, next quarter, we're able to do the same.

Operator

This concludes our Q and A. I'll now hand back to Rachael Sparounis for any final remarks.

Speaker 1

Yes. Thanks, everyone, for dialing in and participating. It's been a long call for middle of the summer. We look forward to touching base again in November. Thank you very much.

Speaker 1

Bye bye.

Operator

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your line.

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