So altogether, I feel like I’ve got sort of in my bones about eight cycles and thinking about where we are today and kind of looking at all that experience. It does feel like there are some patterns that are important. So I think the first pattern is that – of those eight, half were relatively, in hindsight now, fairly short upturns. They felt very important and exciting at the time, but they didn’t last long. But the other four, and I would include this one in that. And we can discuss that in Q&A are fundamentally different. They are longer and more persistent. And they share some common characteristics. So one – and forgive me, but we’re going back to 1957. But the truth is that the dynamics in our business in terms of supply and demand haven’t really changed, at least since World War II, maybe even further back.
So the first thing they all have in common is that they were preceded by 10, 11, 12, maybe even 13 years of fundamentally bad markets. And in that period, fleets got older, order books shrank, maybe there were some bumps along the way of activity, but fundamentally, yard capacity shut down. So, like, when was the last time we were in a strong market, 2008, 2009? I think shipyard capacity is substantially lower today than it was then. So that’s the setup. And then what they all have in common is that some unexpected positive demand event occurs, usually geopolitical. That kind of lights the fire. And it’s usually not just one event. It’s several things that happen. Now, I mean, each of these upturns is different and unique, but there are some similarities, right.
And I don’t want to do this now, but if you want Q&A, we can think back to what were the specifics in each of these upturns. But you kind of ignite this unexpected jump in demand through not just one event, but a series of events. And then it becomes clear that supply is not going to be able to catch up. And that’s really the foundation of one of these strong markets. They last anywhere from four to six years, and they all end the same way, which is when a really deep economic crisis hits the global economy. So I’m going to leave it at that. I think the questions are, where are we in the cycle, and what is Ardmore doing to position itself for different probabilities of outcomes here? So happy to engage in that discussion with you. And anything else?
Just last thing I want to do, though, is thank you all for joining us today and in particular thanking Curtis for coming up all the way from Florida in spite of the weather and in spite of his [indiscernible] there. So that’s an Irish expression. And happy to open up the floor for questions.
A – Bryan Degnan: For the benefit of the people on the webcast, we do have microphones that will be circulated, so we’ll take one up here. And for those again on the webcast, if you want to ask a question, please email ardmore@igbir.com. I’ll feed those into the mix here, but for the time being, please go ahead.
Unidentified Analyst: Thank you. Thank you. Within the chemical and product segments, what percentage of the fleet, the global fleet, can make it around Africa without refueling?
Anthony Gurnee: That’s an easy question. Every ship can. However, operationally, they may not want to do that. So, in fact, South Africa is becoming a bit of a bottleneck, because if you have to carry more bunkers, you’re shutting out cargo. And there may be other reasons if, I don’t know. Gernot?
Gernot Ruppelt: Yes. There’s a – so we didn’t touch on this, but bunker planning becomes definitely one of those operational elements you need to be very aware of to essentially make sure you don’t – you bunker where you’re intending to bunker and not squeeze into a last minute situation.
Bryan Degnan: I’ve got one upfront here. Yes.
Unidentified Analyst: I have three questions, but when you said South Africa, do you mean labor in South Africa, or are they short of fuel?
Anthony Gurnee: Gernot?
Gernot Ruppelt: I think whenever you move away from the main bunkering ports and the main refining regions, you might find yourself exposed to scarcity of bunker supply, higher pricing, infrastructural bottlenecks like barge availability, and then potentially longer waiting time. And of course, every time we either pay more for our bunkers or extend our voyage length without any revenue to put towards it, that has a negative impact on our TCE. So it’s less labor shortages, it’s just pricing and availability of fuel and the infrastructure. And of course, by being very proactive and forward looking in your voyage planning, you can avoid to find yourself in those messy situations. But it’s just one of many examples where – and I think it’s a great example, as the world changes trade patterns there’s always a lot of things to consider.
And in itself that creates, of course, volatility around some of those bunker supply lines with a further knock on effect on the entire oil system.
Unidentified Analyst: My three original questions are, you mentioned China. Please expand on that. Two, can the Russians sell refined products to say, a middleman in Persia who will sell it to an Indian and change the label and deliver it into the market? And three, when you calculated return on capital for those environmental savings, what was the price of fuel that you saved? So China, Russia and price.
Anthony Gurnee: Can you repeat the third question?
Unidentified Analyst: He showed a return on capital of – excuse me, 40% to 140%. So that means you saved money to get that 40% to 140%. At what price of fuel did you save it?
Anthony Gurnee: Okay, I think it was $500 a ton, which is kind of where we are, relatively $500 a ton, which would be…
Unidentified Analyst: $500 a ton.
Anthony Gurnee: Which would be like, you know…
Unidentified Analyst: $70 a barrel.
Anthony Gurnee: $70 a barrel, yes. But I think for the other two questions, Gernot would you like to…
Unidentified Analyst: Russia and China?
Gernot Ruppelt: Yes. I think there’s certainly been some concern around to what extent does essentially Russian origin crude or products find their way back into the supply chain in the west. Essentially, if you sell crude oil from Russia into refineries anywhere in the world, particularly in the east, at some point, will they be refined and blended and find their way back into the refined chain in the west? I wish I could give you a definitive answer. Of course, we don’t track – we don’t have the ability to blockchain the oil train in that sense, but I think that’s a concern. And I’m not sure anybody has a really good and exhaustive answer. Yeah.
Unidentified Analyst: And you said China is restricting exports.
Gernot Ruppelt: So there has been – there has been for the earlier part of last year, a significant drop in crude throughput in China, pretty much on the back of just weaker domestic demand, because there has been some countercurrents in the Chinese economy. And as a part of that, we have seen a general trend towards declining Chinese exports. That being said, we know that a lot of the teapot refineries, the independent, non-state owned refineries, also operate with the main purpose to export their products overseas. And we are now actually seeing towards the later part of last year and into this year that crude throughput in China is very much on the rise. New export quotas have been issued, export quotas aren’t a perfect predictor of actual export volumes, but everything points towards a likely increase of Chinese product exports again.
Unidentified Analyst: Thank you.
Unidentified Analyst: Since we’re here, Tony, you just sort of left the last bid wide open, saying this could be a four to six year bull market. We’re two years in, roughly. And how does Ardmore respond to that? So I take it to mean that you think this is going to be a longer cycle. Are you thinking about your strategy on that basis any differently than you were, say, a year ago at this time? Or what are you looking to do against that backdrop? And again, you never see a cliff coming, right? So how do you prepare for that side of it?
Anthony Gurnee: Sure. Yes. So I think it was Mark Twain that said that history doesn’t repeat itself, but sometimes it rhymes, so there’s no certainty. But there really is some interesting parallels and commonalities of the periods that I mentioned. And I think there’s a general view that this feels like it could go on for another couple of years. Nobody knows how it’s going to end, but I think we all do know how it’s going to end. It’s how all your portfolios are going to end. And this could have another two, three, even four years in it. It’s also interesting when you look at those prior periods there were spikes within those, right? But they were overall at just much higher levels, right. So who knows? But it seems like a really good setup, and the geopolitical issues feel fairly persistent at the moment.
So in terms of what are we doing about it, we like where we are. We don’t have a fleet replacement problem, not for another four or five years, our fleet is highly fuel efficient. The investments we’re making, as Bart described, are terrific. We just kind of top graded the fleet a little bit by selling the 2010. We weren’t planning to, but we just saw the opportunity because in particular, the value of that older ship had gone up a lot. And we’re just intently focused on performance. And so if we see opportunities to grow, we will. We could have engaged in a lot of growth in the last 10 years, and none of you would have liked it. Okay. So we’re definitely big enough to play on a global stage. We’re nimble. And what that really means is that we’re able to really focus on each ship and the voyage and optimizing the voyage and trading it out, but also having optionality in the way you position your fleet, which is difficult.
And then I think the other thing people don’t quite, even if you hear it over and over, again, it doesn’t quite register, but the biggest fleets in our sector are only 5% of the market. Okay. So it’s a very, very fragmented trading business. And what really matters is how you were able to trade your ships, not necessarily, at least on the market side, any kind of market cloud. So that’s a bit of a ramble. But go ahead and ask me the question.
Unidentified Analyst: Well, no, I mean, it’s – just sort of coming back to it. So is that – are you thinking about your position and the way that you approach the market in the same way that you were a year ago at this time? Is that kind of the answer?
