Euronav (EURN) Q3 2021 Earnings Call Transcript

Euronav (EURN 2.07%)
Q3 2021 Earnings Call
Nov 04, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Euronav third quarter 2021 earnings conference call. [Operator instructions]. I would now like to turn the conference over to Brian Gallagher, head of investor relations. Please go ahead.

Brian Gallagher -- Head of Investor Relations

Thank you. Good morning and afternoon to everyone, and thanks for joining Euronav's Q3 2021 earnings call. Before I start, I would like to say a few words. The information discussed on this call is based on information as of today, Thursday, the 4th of November 2021 and may contain forward-looking statements that involve risks and uncertainties.

Forward-looking statements reflect current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events, performance, underlying assumptions, and other statements, which are not statements of historical facts. All forward-looking statements attributable to the company or to persons acting on its behalf are expressly qualified in their entirety by reference to the risks, uncertainties, and other factors discussed in the company's filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov and our own company website at www.euronav.com. You should not place undue reliance on forward-looking statements. These forward-looking statements speak only as of the date of that particular statement, and the company undertakes no obligation to publicly update or revise any forward-looking statements.

Actual results may differ materially from these forward-looking statements. Please take a moment to read our safe harbor statement on Page 2 of the slide presentation. I'll now pass over to our chief executive, Hugo De Stoop, to start with the agenda slide. Hugo, over to you.

Hugo De Stoop -- Chief Executive Officer

Thank you, Brian. Welcome to our call today, wherever you are. In terms of the agenda, I will first run through the Q3 highlights and make some comments about what we believe will be seen as the trough of this tanker cycle. Brian, our head of investor relations, will then look at the current themes and catalysts in the tank market before I return to discuss in more details on the strategy and outlook for the tanker sector.

So turning to Slide 4 and the highlights page. There are more low lights than highlights during Q3, which was arguably the most challenging freight market in the last 20 years. This was driven by two key factors: lack of commercially available barrels, even though OPEC plus stated their cuts, it didn't translate into enough barrels available for the independent fleets such as Euronav. Furthermore, the illicit trade around sanctioned Iranian barrels took away what we -- what would have been otherwise barrels required to be transported by the regulated fleet.

The market also suffered from an oversupply of vessels, although this started to be eroded as we exited Q3. We have continued to use the low freight rate environment to accelerate dry dockings and completed 23 years to date, while another four will be done by year-end. That's around 40% of our underlying fleet. However, the market has improved strongly since early September.

The improvement in rates has come from a low level of freight rates, but this sustained improvement has sequentially improved each week over the past six to eight weeks. This has been driven by a number of factors and catalysts such as greater number of barrels available for exports in both the Arabian Gulf and the Gulf of Mexico. And improved demand for oil, in particular, fuel oil as some additional demand came from customers able to switch between various fossil fuels and willing to do so because of the elevated gas prices; and finally, an increased recycling activity in older tonnage. This gave a better balance between fleet supply and supply of available barrels for exports.

In recent earnings calls and presentations, we have consistently stressed the constructive factors for the tanker market in the medium term. Factors such as fleet age, order book ratio, and incoming emissions regulations. It is encouraging as we move into seasonally stronger trading period to see that the market is gaining traction and rates moving higher. All of this is good and goes in the right direction, but a return to profitability will require continued improvement on those oil demand side as the winter progresses.

Turning to sovereign financial, our leverage stands at 48.7% and is supported at the end of September with 791 million of available liquidity. We were pleased to refinance our 200 million Nordic bond at an improved coupon in early September, allowing us to make sure we continue to have access to alternative source of capital, such as the Nordic bond market. Our timing looks positive already as yields have risen steadily since. Despite a loss during the Q3, we will distribute a $0.03 dividend per share as per previous loss-making quarters.

With that, I will pass over to our head of investor relations, Brian Gallagher, to make -- to walk you through some market highlights. Brian, over to you.

Brian Gallagher -- Head of Investor Relations

Thank you, Hugo. I'm now going to run through some of the catalysts we've been seeing over recent weeks and months that Hugo alluded to earlier. The encouraging element of this feature is the fact that this has not been an exhaustive list. Other factors are also at play beyond the list that we highlight on Slide 5.

Recycling, for instance, September alone saw four VLCCs and four Suezmax that were removed from the global fleet. That's a 1% reduction in the fleet size alone and has been followed up in October with another three VLCC equivalents, which have exited the fleet. The huge squeeze in fuel prices in things like natural gas during Q3 has also driven some switching both for economic and security of supply reasons. Estimates vary, but this winter there's a consensus of between 0.5 million and 1 million barrels per day of additional crude demand coming from this fuel-switching source.

That one-off factor is a very strong benefit to our marketplace. Thirdly, it's been frustrating in recent months that production rises in global crude have not always translated into a like-for-like increase in export barrels, but this feature has also started to change, starting in late Q3. For instance, we saw in September that 550,000 barrels a day alone were exported from the Persian Gulf, and that's been followed up with nearly 700,000 barrels from the same region during October alone. Fourthly, further recovery of oil demand is expected to continue beyond this winter seasonality as we see increases in areas like jet fuel, continue their trajectory toward pre-COVID levels of consumption.

Finally, and as a fifth point, at some point, the EIA the inventory build will have to begin. They themselves forecasted stocks will start to rebuild starting in January as global inventory in terms of oil and crude around the world is way below the five-year average to the end of 2019. Inventory build historically have been very positive for tanker markets and provide further encouragement to our view that the market has now reached the trough. Moving on to Slide 6.

These short-term catalysts are supporting a more general improvement in both the crude demand picture and also the supply dynamics. Slide 6, combines the trajectory of the IEA forecast for oil demand over the coming five quarters with that of the proposed OPEC plus tapering projections. Unlike other industrial and shipping sectors, the late-cycle nature of tanker shipping means that we have yet to regain the pre-COVID levels of consumption that other sectors have enjoyed already. But this slide illustrates clearly that the anticipated progression in the market recovery in both supply of oil and the demand for oil should continue to drive tanker markets going forward.

Euronav as the largest platform available to investors is ideally placed to benefit from this recovery as Slide 7 illustrates. This slide highlights the robust and yet diversified platform that we have built to navigate what we believe is the upcoming and next stage of the tanker cycle. Our large fleet has a core focus of 37 VLCCs, which are among the youngest among our competitive group at 6.7 years of age on average. We are supported by multiple contracted revenue streams, which were 2021, will drive our cash breakeven rates to a very low and highly competitive level.

Our strong balance sheet has allowed us to simultaneously invest in the future. We're expanding our core fleet, for instance, by 15% with eight new eco-vessels, which will start delivery in January of next year. And yet, we retain a very conservative leverage ratio. Our fully integrated platform has been supportive of shareholders as well.

We've returned over $1.2 billion of cash dividends since we listed in 2004. And alone in the past 21 months, we've returned $2.4 per share via dividends and buybacks. Platform will provide investors with a very strong exposure to the future development of the tanker market as we now show in a bit more detail on Slide 8. Slide 8 focuses on the free cash flow generation per share from Euronav.

And when we compare ourselves with our notable peers, it's clear that returns will be very competitive for the upcycle metrics, particularly of 50,000 and $75,000 per day. Euronav on that basis then provides the highest potential return from the platform that we've built over many years and which we looked at in a bit more detail earlier. That concludes a very quick run through our market view and Euronav's positioning. I'll now pass it back to Hugo for a summary.

Hugo De Stoop -- Chief Executive Officer

Thank you, Brian. Our traffic slide on Slide 11 shows a double upgrade of oil demand and oil supply. Demand has continued to grow, albeit remaining below the pre-COVID levels of consumption. Production growth of crude continues steadily and now importantly, converting into increase in exports.

This is more than probably due to the fact that all inventories across the globe are now below the five-year average. Our other variables, well, ton-miles, investment supplies are unchanged. But here too, there are some positive signals. For instance, Q3 was the lowest quarter for tanker orders in 25 years with the yards full of orders from other shipping sectors and in coming environmental regulations, that came with no surprise.

The medium-term picture for vessel supply is particularly encouraging. As I said in my introductory remarks, we're not out of the woods yet, but given how low the freight rates were over the summer, we welcome the rebounding and hope to reach profitability levels in the not-too-distant future. We are of the view that Q3 will represent the trough of the cycle, and our platform is very well-positioned to benefit over the coming quarters of improved tanker fundamentals and the short-term catalyst as they gain traction. That concludes our remarks.

Thank you for your attention. And I now pass back to the operator to take your questions. Thank you very much.

Questions & Answers:

Operator

Thank you. [Operator instructions]. And the first question comes from Jon Chappell with Evercore ISI. Please go ahead.

Jon Chappell -- Evercore ISI -- Analyst

Thank you. Good afternoon, Hugo and Brian.

Hugo De Stoop -- Chief Executive Officer

Hi, Jon.

Jon Chappell -- Evercore ISI -- Analyst

As the tone has shifted from maybe cautiousness to a consensus optimism that things can only get better from here? It seems like some arbitrage opportunities have opened, meaning the time charter market seems to be moving up, while spot continues to kind of ebb and flow around pretty weak levels, and also second-hand values has lifted as well. So when you think about your strategy for the next 12 months, understanding your backdrop of being optimistic, but we don't have 100% line of sight. Have you thought about creating or taking advantage of some of those arms by getting rid of some of the older ships as the new vintage come on next year and/or putting some more ships on charter just to raise your breakeven at the beginning of the cycle?

Hugo De Stoop -- Chief Executive Officer

Well, I mean, thank you very much for this very nice summary of where we are because that's exactly where we are and where we feel we are. I think that fleet rejuvenation is always the agenda. Now, remember that toward the end of the year, we will potentially lose four VLCCs because they were on the sale and leaseback with no purchase obligation at the end of the charter. They will reach 15 years.

We will have the opportunity to redeliver them just prior to the 15-year survey, which was by design. So at the end of the day, the shares that we get at similar times than those who will be -- we believe it compensates for it. So if we don't do anything else, we are almost one for one in terms of fleet rejuvenation. Now, in this market, you have to be opportunistic.

So you have to look at whatever you can do to create value for the shareholders all the time, that's hopefully what we do. And there is an opportunity to extract more value of the market. And as you said, to take advantage on arbitrage, we will certainly do that. I will end by saying that in terms of time charter market, I mean, we are seeing indeed increased activity, but I believe that that's only because the charters are looking at a market which is on the rise, and they want to lock still what they believe is great value and obviously, being on the opposite side, what we believe is probably too low compared to what we could expect.

Jon Chappell -- Evercore ISI -- Analyst

OK. That makes sense. And then, Brian, one for you. The slide lays out the short-term factors that are gaining traction.

I mean, listen, I'm in the same boat as you guys, but have been continually disappointed in the pace of this recovery. COVID setbacks aside, what are some of the risks that can continue either to derail or delay the recovery that you've laid out here with all these other catalysts?

Brian Gallagher -- Head of Investor Relations

Yeah. It's a fair point, Jonathan, as always. I think there's probably outside of COVID, maybe three risks is that, firstly, I think the recovery, I think everyone's sort of frustration has been a bit patchy. So we see some really strong numbers the last three months now in terms of exports from the Arabian Gulf.

But clearly, that's not been followed by other parts of the OPEC plus tapering. And that's probably down, production is just not simply able to be raised in certain parts of the OPEC consortium as it were. So I think that is probably one risk that we don't get this sort of uniform rise. I think a second risk is clearly going to be from OPEC plus itself in terms of how it behaves and where it wants to see things develop.

And I think the last risk is obviously one thing that we've all forgotten about. Is the oil price. We are reaching a pretty elevated level, seven-year highs. Got some headlines about how high the price is, and the difficulty that we're -- we could always encounter as we -- if you remember back a few years ago, we just have a slide showing where we thought the demand destruction kicked in, and it's a start at these sorts of levels in the mid-80s.

So yeah, we continue to see a higher oil price, that could also sort of choke off some of that reasonably fragile demand recovery. So it's nothing fancy, as you say. But I think the point we wanted to make is that pushing against that those capexes. We do expect that the seasonality will be slightly driven out of our business as we get through the winter, simply on the basis of we've got that recovery.

And we also believe as we said in the last couple of calls that we think ton-miles will be a story for 2022. So you're absolutely right, on the fact that it is very patchy but also, there are some very strong, as Hugo said, very strong fundamentals that we're trying to bridge to from '22-'23 onwards. The encouraging thing is that we didn't have to think very hard to come up with those catalysts because we're seeing them every day over the last eight to 10 weeks. But you're right to highlight it is nothing guaranteed and some of these are a bit patchy.

But we'll continue to be very focused and we'll continue to be very, very driven because we're seeing as a run rate today, they are a single voyage and round voyages being delivered at $20,000 a day plus as a live number over the last few days. But the trajectory has continued since we are putting these numbers together.

Jon Chappell -- Evercore ISI -- Analyst

OK. That's great. Thanks so much, Brian. Thank you, Hugo.

Brian Gallagher -- Head of Investor Relations

Thanks, Jon. Bye-bye.

Hugo De Stoop -- Chief Executive Officer

Thanks.

Operator

The next question comes from Randy Giveans with Jefferies. Please go ahead.

Randy Giveans -- Jefferies -- Analyst

[Inaudible] How is it going?

Hugo De Stoop -- Chief Executive Officer

Hey. Very well. How are you?

Randy Giveans -- Jefferies -- Analyst

Good. Good. So I guess, Brian, I know you've historically included some commentary regarding the Iranian fleet and maybe potential impact of additional Iranian barrels coming to the market there. I wasn't in the presentation this time, but any updated commentary on that situation and maybe the market impact of a new deal there?

Brian Gallagher -- Head of Investor Relations

I mean, we've obviously been very keen to keep that in people's sight lines. And we're taking some of the data from some very good sources including [Inaudible] in terms of some of the data sources. Yes, I think the potential benefit would be both structural because we look at the data we've we'd like to see. We've got around about 45 to 55 VLCCs, we think hedging those trade, and they're all aged over 18 years of age.

We've got a very high scrap price. We've obviously had the news overnight that the Iranians are going to engage with the Europeans on 29th of November. And if that does lead open to a deal, we think there'll be that structural benefit of that older tonnage leaving the fleet, which has not been engaged clearly in commercial trades but will be very positive for sentiment because we're talking about 5% of the world fleet potentially leaving in a short space of time. But also operationally, I think it's pretty consensus now there's 700,000 to a million barrels per day that's been if you like, kept out of the commercial world.

Those barrels should logically return to commercial players like ourselves and our competitors. And the Iranian fleet took nine months to come back into full operational mode from the when President Obama lifted the sanctions in 2015-16. So there's some good data points there. Nothing has really changed.

If anything, the latest data we've seen is the Iranian to China trade has actually dropped off a little bit. And you guys are making the point in recent presentations. We don't see this trade growing. It's just in a world where we've had barrels price must move plus when we've had a world in sort of delayed recovery from COVID, COVID related issues over the last 18 months, a million barrels a day potentially is a very big number in our world.

So that's the benefit, both structural in terms of the sentiment as older ships leave the fleet, and operational benefit as those barrels return to the commercial fleet. So no real change in the numbers, Randy. But clearly, that does seem, and again President Biden also pushing for additional barrels to try and hold the oil price down, but there's some very strong tailwinds now potentially that could bring this back into play into 2022.

Randy Giveans -- Jefferies -- Analyst

Sure. That makes sense. Thanks for the color on that. And I guess, secondly, Hugo, a big investor has taken a pretty big position in Euronav, right? So there's been some rumors about Euronav possibly being acquired.

So first, any comments on that possibility. And then, on the other hand, have there been any maybe internal discussions about Euronav actually being an acquirer of a smaller player at this low point in the cycle.

Hugo De Stoop -- Chief Executive Officer

Yeah. I hear this what would come in.

Randy Giveans -- Jefferies -- Analyst

Well, come on. [Inaudible] Go ahead.

Hugo De Stoop -- Chief Executive Officer

No, I was going to say. I was surprised it wasn't the first question, but that's probably because we had a one-on-one conversation with some of you prior to the call. So I think that you are absolutely right. I mean, this is an investment.

So John Fredriksen has used a vehicle that he used to make investments and it's not frontline acquiring shares of Euronav like we've seen them in the past with the other companies. So tanker shipping market is a small market. We come across each other all the time. We talk a lot to each other.

And there is nothing unusual there. What people need to understand is that for John is very difficult to add more to what he has into frontline. And so, we are very happy that he has chosen our platform to invest what I believe will be a great investment because he's super bullish on tankers in general. So I would say to all the investors on this call if you have this kind of charismatic person and knowledge of a person about the tanker market investing, I don't know and a lot of people follow through.

As far as consolidation is concerned, I think that 15 years ago or 17 years ago, we set up this platform in order to try to help the consolidation of the market. And that strategy has not changed dramatically. Now, we were on a panel with frontline, the other night, and we both said that what needs to be consolidated in priority are the small players. That's really the people that are sort of hurting the market simply because they don't have the capacity together, the information that we do, being present in the market all the time.

And that should be the priority. So we think that the market will consolidate further. We would like to be a participant in that consolidation. And the priority is probably to consolidate smaller players.

But if you look at what we have done in the past, it's more a question of opportunities rather than really deciding who you acquire and at which point in time.

Randy Giveans -- Jefferies -- Analyst

Got it. That all makes sense. Thanks for the additional color there.

Hugo De Stoop -- Chief Executive Officer

Thank you.

Operator

The next question comes from Chris Tsung with Webber Research. Please go ahead.

Chris Tsung -- Webber Research -- Analyst

Hi. Good afternoon. How are you, Hugo?

Hugo De Stoop -- Chief Executive Officer

Doing very well, and you?

Chris Tsung -- Webber Research -- Analyst

Great. Thanks. I wanted to just ask a bit about Slide 6. The IEA demand forecast looks like a dip down in Q1 before recovering.

So I wanted to just get your view. Do you think the tanker market recovery would follow this, albeit at a slight lag? Or do you think it possibly comes sooner either?

Hugo De Stoop -- Chief Executive Officer

Obviously -- go ahead, Brian.

Brian Gallagher -- Head of Investor Relations

OK. Maybe, Chris, you're a bit muffled on that. But yeah, we're just taking a data point. And the reason we're trying to sort of just -- with that slide in mind, is that we want to just try and show that the catalyst we're seeing.

Clearly, there's going to be a one-off, as you guys said earlier, with regard to some of the fuel switching. That's going to be sustainable for more than this winter period. But these are the official sort of agencies that are giving the both demand numbers from the IEA, and they're continuing to see expecting to see less seasonality as we go through to 2022 as we get that sort of demand recovery because we're looking for the last final if you like, building blocks, in particular, the world's going back to normal, more transportation, which is about 55% of the end-use of crude oil and that being reflected in a higher demand for jet fuel, and therefore, the refiners are using more crude as a raw product. So yes, what we're just trying to show is that there is this trajectory through over the next four or five quarters, which if it's followed, obviously, with the caveat and the COVID doesn't return, that there is this trajectory.

Because we have to remember that the real underlying point we're trying to make is the crude tanker market is very late cycle. We're not like other shipping sectors or other industrial sectors where they've already recovered to where they were in Q4 2019. We haven't got to that stage yet in terms of crude consumption. So that's the point we're trying to make is that we are still in a recovery phase, and that should, as we get into the final stages of that with the marginal supply as we're seeing with the tension in the markets reflected in higher freight rates.

But that's a trajectory we can see, all things being equal, both in both of increasing supply, barrels, or OPEC plus continues to taper their production cuts, but also demand continue to come through. So just to show that that background of both supply and demand is very supportive and it's underlined by some of the short-term catalysts that we've got.

Chris Tsung -- Webber Research -- Analyst

All right. Thank's Brian. And just maybe one more for me. On the successful B30 biofuel trial or never out to other vessels? Or is it limited to just the one?

Hugo De Stoop -- Chief Executive Officer

Well, I can probably take that one. So we've done several trials, and we continue to do so. The reason why we are able to do it because we have access to biofuel that is priced at or at a very, very thin margin above the LSFO as you can find in the market. And that's because of specific subsidies available for European companies in the Port of Rotterdam.

Now the reason why we're interested in testing those fuels is because we believe that there would be part of the fuel mix in the future. And as we are all looking to decarbonization, if they could be priced at similar price, then the choice is obvious. Now every time we are shifting in August, by the way, the case when we shifted from HSFO to LSFO every time we're shifting from a fuel to a different fuel. We need to be very cautious, and we need to test it gradually over a short period of initially over longer period of time, but maybe when we are near a port, maybe waiting to enter a port.

And then finally, the final stage is to test them over the full duration of voyage. And that's exactly what we're doing, and we're very happy to be at the forefront of those trials. And we do that in cooperation with the fuel producer, obviously, and we share the results with them. But that's very much how we are thinking about it.

Chris Tsung -- Webber Research -- Analyst

Got it. Right. Thank you.

Operator

[Operator instructions]. The next question comes from Ben Nolan with Stifel. Please go ahead.

Ben Nolan -- Stifel Financial Corp. -- Analyst

Hey. Good morning, guys. So I wanted to start with something that Brian, you, and I have talked a little bit about, but it relates to the sort of the dividend policy and appreciating that at the moment, there's not a lot of free cash flow. But hopefully, as you guys layout, that will improve over the course of next year.

You guys are at a little bit of a tax disadvantage on the dividends, given the dual listing. But the share price is now a little bit higher. So maybe the relative incentive to maybe do share repurchases versus dividends is not quite as obvious as it was. So just thinking about how do you address sort of what you would anticipate doing with your dividends once the cash flow is a little bit higher as we move forward?

Hugo De Stoop -- Chief Executive Officer

Well, thank you for that question because that's -- it's very important for people on the call to understand that indeed, in Belgium, we may be at a disadvantage. But there's a lot of mechanisms to avoid or to claim it back when you are foreigner. So we don't believe we are disadvantaged compared to the others. So it's just a question of filling the form and making sure that either you avoid paying upfront or you claim it back? And then it's relatively straightforward.

We have improved the page on the website to show you how you can do that. And so that should be very, very helpful. And obviously, for the Belgium -- who are Belgium citizens, then obviously, they have pay withholding tax, but that's the same if you citizen, you have to pay withholding tax in the U.S., etc. So I think it's more of an administration problem than anything else.

And maybe the difference is there in Belgium. If you don't feel that form the company is deducting it automatically, but it's certainly not something that you have to do if you wish or decide to fill in the form. The balance between share buyback and dividends will indeed be driven by where the share price sits compared to NAV. There will always be sort of a balance between the two because we don't want to go full speed on only one of the two instruments to return capital to the shareholders.

And I think what we have done in 2020 was very useful for us in terms of understanding what one sort of return does to the share price and what the other sort of return does to the share price, as well as, reinvesting some of that capital into renewing the fleet. We are coming closer and closer to the time where the first measures taken by the IMO, the EXI, the CII will take place. And we are also hearing quite a lot of positive comments from our clients that they are more and more interested in chartering in vessels that consume as little as possible and name and therefore, emit as little as possible. So we also need to be careful -- need to be minded about how we renew the feed and whether we should accelerate this fleet renewal or not.

So as always, there's a slide in the deck that we use in roadshows, which shows how we allocate capital. And it's something that is very dynamic. We're at the point of taking the decision, we are looking at everything possible, including debt reduction. But as you know, our leverage is at the moment, relatively conservative.

But including that, if we were to exceed 50%, for instance. And it's at that point in time that we take the decision. So it's very difficult to make a better policy than that because we are in a volatile market. We are in a cyclical market, and there is a lot of dynamics around the company itself.

Ben Nolan -- Stifel Financial Corp. -- Analyst

OK. That's very helpful here. And then for my follow-up, just hopefully pretty straightforward. You said that I think 27 vessels are being dry docked this year, 40% of the fleet, and some of that's brought forward.

So for next year, what's the bogey here? How much less would we assume that it should be?

Hugo De Stoop -- Chief Executive Officer

It's about -- yes, Lieve?

Lieve Logghe -- Chief Financial Officer

Yes. I can help here. Indeed, so we had a planning, we are currently making the budget. So we are planning to have about 16 dry docks shuttled in for 2022.

Ben Nolan -- Stifel Financial Corp. -- Analyst

Perfect. Thank you.

Hugo De Stoop -- Chief Executive Officer

And by the way, similarly to what we have done this year. If it turns out to be a fantastic year, you can delay because basically, you have a window of six to 18 months if you push to dry dock your vessels, especially the ones that are less than 15 years of age. So again, this is our plan, our budgets foresee that number of vessels, but we will be very dynamic when we think about it.

Ben Nolan -- Stifel Financial Corp. -- Analyst

Yeah. Your mouth to God's ears there, Hugo. I hear you. Thanks.

Hugo De Stoop -- Chief Executive Officer

Yes.

Operator

The next question comes from Quirijn Mulder with ING. Please go ahead.

Quirijn Mulder -- ING Financial Markets -- Analyst

Yeah. Good afternoon. Can you hear me?

Hugo De Stoop -- Chief Executive Officer

Yes, we can.

Quirijn Mulder -- ING Financial Markets -- Analyst

Perfect. My question is about scrapping. You've seen nice numbers in September, I think, four plus four. Can you give an -- update us on what you think is happening in the, let me say, in the last quarter of 2021 and maybe in the first month of 2022.

Given the fact that for example, that there's always a delay between, let me say, low prices and the scrapping.

Hugo De Stoop -- Chief Executive Officer

Yes. So you're hitting the nail on the head there, Quirijn. There are a couple of factors. I mean 2020 was a fantastic year in terms of earnings.

To ask people to directly go from a booming year to a very bad year where they believe that they should scrap their vessels is very difficult. So you always have a time delay or a time lag between a good year and the decision to scrap a vessel. That's the first point. The second point is that, obviously, those decisions have been polluted by the fact that some people were willing to pay a premium for very old tonnage that they would use until their end of life.

In an illicit trade and they were paying one or two or 3 million over the scrap price for those vintage and then trading the ships in what was very lucrative, but obviously, legal or certainly not available for companies such as Euronav, which was to transport Iranian oil. We believe that, first of all, the U.S. is looking at it a little bit more closely than what they have done in the past. And secondly, and maybe more importantly, that there has been so much tonnage both for that trade that now it is oversupply.

So that trade has too many ships compared to the number of barrels that are being transported from Iran, mostly to China via Malaysia. So the last couple of ships that we have seen being presented for sale or present -- either for scrapping or for sale. There was no bids which were beating the scrap price. And therefore, they went for scrap, which is a signal that the appetite for the ships for illicit trade has vanished.

The fleet that is currently doing it will probably continue to do that until something happen in the country, but no more ships will be there. So everybody who now looks at what he can currently earn, but more importantly, what he has to spend in order to pass a survey and be certified to operate in the market compared to the amount of money that he can get from the scrap price because scrap is very, very elevated at the moment will probably choose scrapping. And that's why we believe that Q4 and Q1 or the rest of '22 should be very interesting in terms of number of units that will be eliminated from the world fleet.

Quirijn Mulder -- ING Financial Markets -- Analyst

OK. And what is at this moment, let me say, the number of tankers, let me say, use for storage, because I think there are some -- as long as their use for storage, there is nobody who is caring about, let me say, the age of the vessel.

Hugo De Stoop -- Chief Executive Officer

That's totally correct. So -- and on top of that, they can get another type of certificate, which is a lot lighter. So you don't -- you do not need to spend that amount of money. But there are very, very few tankers, which are being used as storage units at the moment.

If we are talking about the 15 or 20-year average. So you always have a number of vessels. And in that number, you see a lot of the Iranian fleet itself because they cannot choose their ships to trade. And anyway, they need those ships as a buffer for their oil production before is being exported through the illicit channel.

So as Brian commented earlier on, the minute we see sanctions being lifted or another policy being applied to Iran or to more scrutiny being put on what they do with the oil, all of that should have a positive impact to our market. And it remains to be seen what turn it will be and what impact it will have, but we are very hopeful that something is likely to happen.

Quirijn Mulder -- ING Financial Markets -- Analyst

Thank you.

Hugo De Stoop -- Chief Executive Officer

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Hugo De Stoop for any closing remarks.

Hugo De Stoop -- Chief Executive Officer

Well, thank you, everyone, for attending this Q3 earnings call, and we hope that the next one will be with hopefully, improved market and better news as we commented earlier. So thank you very much, and talk to you next time.

Operator

[Operator signoff]

Duration: 39 minutes

Call participants:

Brian Gallagher -- Head of Investor Relations

Hugo De Stoop -- Chief Executive Officer

Jon Chappell -- Evercore ISI -- Analyst

Randy Giveans -- Jefferies -- Analyst

Chris Tsung -- Webber Research -- Analyst

Ben Nolan -- Stifel Financial Corp. -- Analyst

Lieve Logghe -- Chief Financial Officer

Quirijn Mulder -- ING Financial Markets -- Analyst

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