Good morning, ladies and gentlemen, and welcome to the Ardmore Shipping's First Quarter 2021 Earnings Conference Call . Today's call is being recorded, and the audio webcast and presentation are available in the investor relations section of the company's website, ardmoreshipping.com. We will conduct a question and answer session after the opening remarks. Instructions will follow at that time. A replay of the conference call will be accessible at any time during the next week by dialing 1-877-344-7529 or 1-412-317-0088 and entering the passcode 10155309. At this time, I'd like to turn the call over to Anthony Gurnee, Chief Executive Officer of Ardmore Shipping. Please go ahead, sir.
Thanks, and good morning, and welcome to Ardmore Shipping's first quarter 2021 earnings call. First, our Chief Financial Officer, Paul Tivnan, will describe the format for the call and discuss forward-looking statements.
Thanks, Anthony, and welcome everyone. Before we begin our conference call, I would like to direct all participants to our website at ardmoreshipping.com, where you'll find a link to this morning's first quarter 2021 earnings release and presentation. Anthony and I will take about 20 minutes to go through the presentation and then open up the call to questions. Turning to slide two, please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from the results projected from those forward-looking statements, and additional information concerning factors that could cause the actual results to differ materially from those in the forward-looking statements is contained in the first quarter 2021 earnings release, which is available on our website. Now I'll turn the call back over to Anthony.
Thanks, Paul. Turning first to slide four for some highlights. We're reporting an adjusted net loss of $6 million, or $0.26 per share for the first quarter, compared to an adjusted net loss of $13 million or $0.39 per share last quarter. The improvement is largely the result of better market conditions, with our Medium Ranges earning 11,175 per day in the first quarter versus 9,425 in the last quarter. For the second quarter to date, we've earned around 11,000 per day with 50% of the quarter fixed. Our chemical tankers continue to perform well in the first quarter relative to MRs, earning 11,950 per day or 12,750 per day on a capital adjusted basis. So far in the second quarter, they're earning 11,250 per day with about 80% fixed. Meanwhile, we've been active in the first quarter on commercial and energy transition projects.
We fixed four of our MRs on time charters of six months to one-year duration at an average rate of $14,000 per day to partly de-risk near-term cash flow pending a full market recovery. We entered into a commercial management agreement with Carl Büttner for four of their 25,000 deadweight chemical tankers, trading alongside our own similar size units. We released our progress report in February 2021, which includes details of our Energy Transition Plan , or ETP for short. In connection with the ETP, we announced the formation of e1 Marine, a joint venture with Element 1 and Maritime Partners, which is now in documentation and should close in the next few weeks. We've also continued to focus on financial strength under challenging market conditions, maintaining a strong liquidity position and balance sheet.
On the next three slides, I'm going to cover recent product and chemical tanker market activity and near-term prospects. Paul will continue with a discussion on longer-term fundamentals and outlook. Moving on to slide six for a snapshot of global MR trading activity. This is a new format which we intend to use in coming quarters to provide an assessment of activity in the MR sector, along with how we're positioning the Ardmore fleet. As you can see from the call-out box in the lower left, we had 56% of our fleet positioned east of Suez in the first quarter, roughly in line with the hemispheric split for the global MR fleet and also where rates have recently been stronger.
You can see that for the first quarter, 7% of our MR ship days were time chartered out, which will rise to approximately 15% for the second quarter on the back of time charters previously noted. In terms of global MR activity, we'll cover the map from left to right. The U.S. Gulf has been soft, but refinery utilization has increased substantially following winter storms in February. There was also an increase in naphtha trade to Asia, driven by price arbitrage. European activity has seen increased volumes of gasoline to the U.S. East Coast, refined products to West Africa, and surplus naphtha also to Asia. In Southeast Asia, we saw lower volumes of palm oil cargoes in the quarter, the result of temporarily constrained supply and higher palm oil pricing.
In Australia, the recent refinery closure at Kwinana is the latest in a string of shutdowns, and we believe this closure alone should result in approximately 20 additional MRs per month needed to bring in substitute refined products. In North Asia, we're seeing increasing refined product flows from China to the rest of Asia on the back of increased export quotas and economic activity and higher volumes of jet fuel to the U.S. West Coast as increasing air travel in North America has driven up demand. Overall, MR ton mile demand in Asia is up 9% quarter-over-quarter, as measured by Automatic Identification System tracking, reflecting a substantial recovery in economic activity in that area. Turning next to slide seven regarding the impact of the pandemic on overall oil demand, the key to a full tanker market recovery.
Oil demand is still down 7 million barrels a day, or close to 7% from its peak in 2019, notwithstanding the substantial recovery from the lows of last year. Mobility is approximately 57% of global oil demand, largely comprising road and air transport and travel, the components of oil demand most affected by the pandemic. Road traffic has rebounded over the past six months but seems to have plateaued for the moment. As a consequence, global gas oil and gasoline demand has recovered significantly, now only 1.5 million bbl a day off of 2019 levels. Aviation activity, on the other hand, remains low. Domestic flights in some regions are recovering to pre-COVID levels, but international and long-haul air travel is still lagging. As a consequence, global jet fuel demand is still down 31%, or about 2.4 million bbl a day below 2019 levels.
We expect oil demand to continue recovering over the next several months as the vaccine rollout continues globally. The big question is exactly when this will rise sufficiently to drive a full tanker market recovery. We believe that this will take place sometime in the second half of the year, but precisely when is unclear. Then moving to slide eight for a look at refinery utilization and current inventories. You can see from the graph on the upper left that Petroleum Administration for Defense District 3, which accounts for approximately 50% of refinery capacity in the U.S. and is the major source of U.S. product export, is returning to normal utilization levels. The graph on the upper right looks at Chinese refinery utilization for both state-owned and independent refiners. While it looks flat, it also looks close to full recovery.
The graph on the lower left shows refined product inventories in the U.S., Amsterdam-Rotterdam-Antwerp, and Fujairah. Interestingly, inventory levels in these key regions have moved below the five-year rolling average, even when considering the large volumes of stranded jet fuel still remaining. On that note, I'll hand over the call to Paul to take the discussion on to fundamentals and the longer-term outlook.
Thanks, Anthony. Turning to slide 10, on the left-hand side chart, we have oil demand broken out by type. The two biggest drivers of oil demand recovery are road transport and aviation fuels. Demand for road fuels and jet fuels are expected to increase by 3.5 million bbl a day in the aggregate between now and December 2021, leading to a full oil market recovery in early 2022. Much of the demand recovery is to come from the U.S. and Europe, while Asia is ahead in its recovery phase, with demand close to pre-COVID levels. Beyond 2022, on the right-hand side is International Energy Agency data, which is forecasting continued oil demand growth post-pandemic of approximately 1 million bbl a day through 2024 and beyond.
Moving to slide 11, one ongoing trend which is accelerated by the pandemic is refinery dislocation, which is now a key demand driver for product tankers.
Dislocation means shutting down refineries in developed areas, with new refineries opening up in the Middle East and China. Over the past few years, we've seen a gradual trend of closing less efficient refineries in the U.S., Europe, Australia, and Japan. These refineries are 100,000 to 200,000 bbl a day, with most built in the 1970s or earlier. At the same time, you have significant refinery capacity expansions in the Middle East and Asia. These refineries are larger and much more efficient. In the Middle East alone, two new refineries, one in Kuwait and one in Saudi Arabia, are expected to come online this year with additional capacity of 1 million bbl a day. As you can see on the map on this slide, there's a very clear trend in where the refineries are closing and where the refineries are opening.
While the trend has been ongoing for some time, the pandemic has accelerated the closure of smaller refineries. Approximately 4 million bbl a day of refinery capacity has been closed or announced to be closed since the start of last year. This is providing a significant boost to our market. Turning to slide 12, we can see how this is translating into increased ton mile demand for product tankers. As we have seen with the closure of the Kwinana Refinery in Australia late last year, once closed, refineries are converted into refined product import and storage terminals. In effect, refinery complexes and regions that once imported crude oil are now importing the finished refined products. These products have been sourced from the new mega-scale refineries in the Middle East and Asia, and the impact for product tankers can be significant.
In simple terms, an MR can carry approximately 300,000 bbl of refined products, and the average voyage length from the Middle East to Europe or from Korea to Australia is approximately 60 days on a round trip basis. This means that every 100,000 bbl a day refinery that closes results in additional demand for 20 MRs or a 1% demand increase. To illustrate this point, and Anthony touched on this earlier, based on ship tracking data, the closure of the Kwinana Refinery in Australia late last year resulted in additional demand for 20 MRs in the last month. We believe that refinery dislocation will continue to be a significant driver of ton mile demand growth for product tankers over the next few years, and along with continued oil demand growth, should support product tanker ton mile demand growth of 2%-3% or more through 2030.
Turning to slide 13, we will take a look at vessel supply. The order book remains at very low levels, while increased ordering activity in other sectors means new orders of tankers will not deliver before 2024. As of today, as you will see on the upper left, the order book for product tankers is approximately 6%, with 185 ships on order delivering over the next three years. We will go through scrapping in more detail on the next slide. However, net of scrapping, we expect product tanker supply growth to be 1% to 2% for the next few years. On the upper right, you will see the chemical tanker order book, which is lower at 3.8% or 67 ships. Net of scrapping, that is expected fleet growth of less than 1% per annum for the next two years.
Looking to the chart on the lower right, there has been a significant increase in new orders for container ships in the first quarter. This is good news for tankers as it limits the potential for new supply to enter the market before 2024, and which supports a tightened supply-demand balance for the next two years. Finally, we believe that many owners are still hesitant to build new vessels. We need to see a full market recovery, and while the energy transition is well underway, the industry is still awaiting clarification from regulators on propulsion technology and emissions regulations. Turning to slide 14, we'll take a closer look at scrapping. We've seen a significant increase in scrapping in the first few months of this year. So far, 15 product tankers have been scrapped in the year to date. Typically, scrapping increases when charter rates are low.
However, the current scrapping numbers equate to a run rate of 60 ships per year, which, as you can see on the chart on the upper right, is well in excess of the past few years. We also believe that scrapping will accelerate as a result of the energy transition, as increased emissions and efficiency targets will put pressure on older and less efficient ships. The product and chemical tanker fleets are also aging. Looking at the product tankers on the bottom right, approximately 2,000 ships or 63% of the fleet is non-eco, over 10 years old, and we expect to be scrapped over the next 10-12 years. Looking specifically at the next five years, there are 260 product tankers over 20 years old, which supports a scrapping run rate of 50-60 ships per year over the next five years.
Overall, based on a low order book and anticipated scrapping levels, we expect supply growth to be constrained in the coming years. That's it on the market outlook and fundamentals, now we'll take a look at our financial performance and capital allocation. Moving to slide 16, we have a summary of our financials. We also have a run-through our cost items and guidance for the second quarter. We're reporting EBITDA of $4.5 million and an adjusted net loss of $8.6 million or $0.26 per share for the quarter. We're continuing our focus on cost control and efficiency improvements. Total overhead costs were $4.9 million for the quarter, comprising corporate expenses of $3.7 million, $0.8 million for commercial chartering expenses, and $500,000 of non-cash items.
Our corporate expenses were slightly up year-on-year due to market increases on D&O insurance and foreign exchange associated with the weaker US dollar year-on-year. As mentioned before, in many companies, the commercial and chartering costs are incorporated into voyage expenses, which means that our corporate cost is the comparable overhead. Overall, Ardmore's cost structure is amongst the lowest of our peer group despite our smaller size, with significant incremental improvement through scale. Currently, our internal commercial overhead costs are approximately 50% of market rate prevailing pool fees. For the second quarter of 2021, we expect total overhead, incorporating corporate and commercial, to be $4.9 million, including non-cash items. Depreciation and amortization totaled $9.3 million for the first quarter. We expect depreciation and amortization for the second quarter to be $9.3 million. Interest costs came in at $3.7 million for the first quarter, which is significantly lower than the prior year.
This is as a result of entering into a floating-to-fixed swap in May of last year. Currently, $298 million or 76% of our debt is fixed at a margin plus 32 basis points through May 2023. We expect interest and finance costs for the second quarter 2021 to be approximately $3.8 million, including amortized deferred finance fees of $400,000. Moving to the bottom of the table, operating expenses across all ship types in the first quarter came in under budget and below prior years. Total OpEx was $14.5 million for the first quarter, compared to $15.7 million for the same period last year. Looking ahead, we expect OpEx for the second quarter to be approximately $16 million, a slight increase related to timing. Turning to slide 17 for fleet and operations update. The fleet continues to perform well with all COVID challenges currently being managed.
Crewing and seafarer welfare remain a top priority. The recent developments in India are top of mind and being carefully monitored. We continue to invest in the fleet to optimize operating performance. We had no new dry dockings in the first quarter, and we have two dry dockings scheduled for the second quarter, including one ballast water treatment system installation. We're forecasting CapEx of $5 million for 2021, comprising three dockings, one ballast water system installation, and performance-enhancing upgrades. Forecasted revenue days for 2021 are 9,210. We have four vessels fixed on time charter in the first quarter at attractive rates, and currently, 16% of days for the second quarter are fixed on time charter. Turning to slide 18, we take a look at Ardmore's charter performance. The charter rates are off the trough of the fourth quarter.
Eco design MRs, which represent the majority of our fleet, report a time charter of $11,540 per day in the first quarter, up considerably from $9,600 per day in the fourth quarter of 2020. Meanwhile, chemical tanker rates are performing very well on a relative basis. As with previous quarters, we are presenting charter rates on the chemical tankers on an actual and a capital adjusted basis. The purpose here is to present the rates for the various vessels on a comparable basis to an MR. The chemical tanker rates are reported at $11,950 per day for the quarter, and on a capital adjusted basis, the chemical ships reported $12,750 per day. Looking ahead, as of today for the second quarter, we have 50% of our days booked in the MRs at $11,000 per day, and on the chemicals, we have 80% of the days booked at $11,250 per day.
Turning to slide 19, we will take a look at our capital allocation and financial activity. We are continuing to focus on financial strength and liquidity with $50.2 million in cash at the end of March. Total net debt at the end of March was $339 million, and corporate leverage was 50.3%. We announced a $40 million preferred share investment in Ardmore by Maritime Partners as part of the formation of e1 Marine LLC. We see this as an attractive piece of capital. It is perpetual, and it carries a dividend rate of 8.5% and has an option for Ardmore to redeem from the end of year three. The total amount is $40 million, $25 million initially, and $15 million subject to final approval from Maritime Partners. The transaction is currently in documentation, and we expect to close it in the coming weeks.
Meanwhile, debt reduction and financial strength remain top priorities under the capital allocation policy. We have scheduled debt repayments of $43 million for full year 2021, while maintaining the revolving credit facilities for financial flexibility. The preferred share issuance provides additional flexibility to prepay debt, reduced costs, and reduced cash break-even levels. Finally, we have unrestricted cash of $2 million per ship, which is amongst the highest of our peer group. With that, I would like to turn the call back over to Anthony.
Thanks, Paul. Before we conclude and go to questions, we want to take some time on this earnings call to discuss environmental, social, and governance and the particular activities around the energy transition for a total of four slides. Turning first to slide 21. ESG is something that's always been important to us, albeit not necessarily under this terminology. Instead, we refer to it simply as progress, hence the name of our report. To mention a few highlights from our recently issued 2020 progress report, when it comes to the G in ESG, in 2020, we were ranked third overall and first for foreign issuers out of 48 public shipping companies on the Webber Corporate Governance Scorecard. With interesting correlations shown in the Webber report between a company's position on the scorecard and long-term returns on capital.
In terms of the S in ESG, we have a high degree of diversity at every level in our organization, both by gender, nationality, and ethnicity, which we believe is a key factor in our solid operating performance in an industry that's otherwise not known for its diversity. As for the E in ESG, we're doing very well on our CO2 emissions by virtue of having a modern fuel-efficient fleet and a focus on fuel efficiency and voyage optimization, which has the twin virtue of reducing emissions but also improving time charter equivalent performance. We know that ESG is an increasingly important topic for investors, and we're happy to discuss these aspects of Ardmore in Q&A or offline later on. Moving to slide 22 for a discussion on shipping industry decarbonization.
The overarching point to make is that the pressure to reduce emissions is not only increasing, but it's also accelerating. We believe rules will come into force sooner than currently anticipated. As you can see from the pie chart to the upper right, shipping is not insignificant in a global context and is no longer being overlooked by regulators and environmental interest groups. Much of the discussion has been around EEXI, which is a technical measure of ship efficiency. In our view, the Carbon Intensity Indicator, or CII, an operational measure, will be more impactful as it will include rising targets year by year, and its A to E grading system, just like school, will make it easier for charterers to screen ships and marginalize those less efficient in the D and E categories.
In terms of initiatives already underway, the EU Emissions Trading System is set to come into force for shipping in January 2022, which is just eight months away, with full compliance expected to be required in April 2023. It sets a cap on carbon emissions, and any amounts over or under will cause a trading of allowances or a payment of fines. Effectively, less efficient ships will cost more to run on any voyages taking place within the EU, or as currently contemplated, those voyages originating or terminating in the EU. Sea Cargo Charter is a framework for assessing and disclosing the climate alignment of chartering activities around the globe, and this will further encourage charterers to screen out inefficient ships.
The Poseidon Principles are intended to ensure that bank portfolios are aligned with carbon reduction targets set out by the International Maritime Organization, which will have the effect of reducing financing opportunities for inefficient ships. Overall, we expect a substantial transformation in the shipping industry between now and 2030, driven by regulations as well as industry initiatives such as those mentioned here. Turning to slide 23, regarding our own focus on efficiency. Our fleet's already well ahead of the target set by the industry. Historically, we have substantially outperformed the Poseidon Principles trajectory. For example, in the first quarter of this year, our emissions were 9% below the target for 2021. In addition, all of our ships outperform the EEXI targets currently under discussion by the IMO, and we believe we're one of only two listed companies in this position.
As a company, we're dedicated to continuous improvement, and to that end, are engaged in projects and initiatives as shown in our 2020 progress report and also shown here in summary form in the lower half of the slide. I'm turning then to slide 24 on our Energy Transition Plan. Rather than taking you through the slide in detail, let me just explain at a high level what the Energy Transition Plan is and also what it's not. The ETP is a long-term plan which will span years and will evolve over time, but with a constant focus on how to improve our core performance and relevance as a tanker company in a period of great change. It augments our core strategy, but it doesn't replace it. We're a tanker company, and that won't change, but what will change is the cargo we carry.
Over time, we will ship more and more sustainable cargoes. In other words, things other than diesel, gasoline, and jet fuel. Sustainable cargoes already make up roughly 25% of our revenues, and we expect this to increase gradually. We also want to get closer to key customers facing similar energy transition challenges so that we can add value through our knowledge and capabilities, whether technical, operational, or financial in nature. Most improvements will stem from technology, and we will increase our involvement in what we refer to as transition technologies. Not research and development of theoretical solutions, but rather the practical nuts and bolts assessment of already developed technologies, their economic viability, and their deployment. This doesn't mean that we're becoming a technology company.
We are and will remain a tanker company with a strong operational focus, and are merely expanding on something we've always focused on, technology as a means to improve performance. A good example is e1 Marine. This involves a very interesting proven technology, a hydrogen generator already deployed on land, able to safely and efficiently produce hydrogen on board ships to power fuel cells. In this instance, we partnered with the developer of the technology, Element 1 Corp., along with Maritime Partners, LLC, a like-minded finance company which sees the potential of the system.
e1 Marine will be independently staffed and run with the three partners contributing their knowledge and expertise to the venture as needed. We will continue to look for additional opportunities, principally to improve our own performance, but where it makes sense, to work in partnership with others on proven technologies which we can help bring to market.
Moving to slide 26 to sum up. A recovery in the product and chemical tanker demand is well underway, but the exact timing of a full rebound is still unclear. However, we think it's very likely to be within the second half of 2021. Our chemical tankers continue to perform very well on a relative basis, probably because of their tighter correlation to global gross domestic product growth, which also gives us reason to believe that a tanker market recovery will be led this time by chemicals and products. Meanwhile, the supply outlook is, we think, very positive, particularly in light of the ordering spike for container ships, gas carriers, and bulkers taking up shipyard berths, meaning that yard capacity is becoming increasingly scarce.
Ardmore's commercial performance in the first quarter reflects a rebound in rates, along with continued solid performance from our high-quality modern fleet and excellent teamwork under very challenging conditions, both at sea and ashore. Our focus was also on risk management and financial strength, with quarter-end cash of $50 million and leverage of 50%, and the pending preferred share issuance supporting us additional financial flexibility. Our ETP initiatives announced in February are long-term in nature, but well underway, with early steps taken to form e1 Marine, along with activities focused on fleet performance. As a final point, even as we look forward to the end of the pandemic, as an industry, we continue to struggle with the operational and human impact of COVID-19, most recently the spike in cases in India, where our thoughts are with our Indian colleagues, whether our seafarers, our shore staff, or our business partners.
Our focus is on what we can do to assist, whether collectively or individually. For example, the Seafarers International Relief Fund, which was launched today, for which there is a link on this slide. Thank you, and we will now open up the call for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question today will come from Jonathan Chappell with Evercore. Please go ahead.
Thank you. Good afternoon.
Hey, Jonathan.
Anthony, I thought it was interesting at the end, you said you're not a technology company, you're going to remain a shipping company. It feels like you've always been kind of between a rock and a hard place on investing in assets in a meaningful way, and now you've had this huge energy transition opportunity that you're expanding into through this e1 venture. When you think about your capital envelope and ability to invest going forward, and I'm thinking more like three to five years, how do you think about the split between hard assets, like the traditional shipping company you are, versus taking advantage of potentially some of the higher returns in this energy transition venture?
Good question. Our thought process is largely around hard assets and building the core business in the direction that we've kind of laid out in the ETP. At the same time, when opportunities arise that offer perhaps more potentially very attractive returns in a less capital-intensive manner, obviously we're going to take those seriously because, again, that's part of our focus now to try to bring our strengths from the operational and technical side to bear on opportunities to partner with others to bring things to market. I can't tell you that there's going to be a lot more e1-type projects, but there may very well be. It'll be a function of what comes along, what we can be convinced of, and what our priorities are at that time.
Do you think the two are mutually exclusive? If you did have an opportunity to invest in assets and at the same time make a big investment in some e1-type project, would the banks be there to support the latter maybe more so than they have been in the former?
It's very possible. It's interesting, the perception of e1 is quite large in the context of Ardmore, but in reality, we're investing $6 million of cash.
We think there's potential for extremely outsized returns there. Yes, the banks are extremely supportive and encouraging in this direction. I think another point I want to make, because it's a very important point to make, is that when we look at the three key areas of our energy transition plan, they're all interlinked and kind of synergistic. Efforts that we make on the technology side can feed into the other two areas, and vice versa. We think it's a pretty cohesive and synergistic approach.
Okay. Just my final one. When I look at the slide six that you put in here for the first time, which is really interesting, and some of the dynamics that have unfolded and layer that on top of some of the other things that Paul spoke about, it seems like the product tanker market should have inflected already, and every time it starts to lift off the mat a little bit, it seems to get knocked back down. I'm not asking you for a timing of an inflection point because I don't think anybody knows that. From your perspective, why do you think it hasn't lifted yet? Is it just there's too many vessels, there's too many vessels in the wrong places, the inventories are still too elevated, the mobility hasn't improved enough? What's been the limiting factor to really impede a full breakout?
I think it's a great question. I think it's just pure shipping economics in that if you're coming out of a deep trough, as we were from the kind of middle late last year, you can see a significant demand recovery before the supply-demand balance gets to that point of inflection. I think we're arguably halfway through the recovery, maybe a bit more, but clearly not enough yet to inflect in terms of supply, demand, and the impact on rates. There's so many moving parts right now on the balance of the recovery, that it's just hard to kind of pinpoint anything. The other thing I think to point out is that other things are happening, right? We've talked about the continued refinery dislocation.
We've also, in this period, seen China very quietly but significantly continuing to increase their exports, which is driving product tanker demand as well. There could be return of things like, nobody's talking about IMO 2020 anymore, other than maybe in the context of scrubbers, but that did definitely create an incremental layer of demand. We think from moving low sulfur products from the East to the West, it's just been swamped by the surplus or the dearth of demand overall and the availability of that kind of product in the West under those conditions, but that could come back as well. You also have the impact of stimulus spending and activity on demand, which isn't permanent, but it can have an impact for up to a couple of years.
That's a rambling long way around to saying that we don't know exactly when the inflection point is, but it doesn't surprise us that it hasn't happened yet.
Okay.
All we've been doing now is making up demand from a very deep trough.
Yeah. No, I get that. Thank you, Anthony.
Sure.
Our next question will come from Randy Giveans with Jefferies. Please go ahead.
Howdy, Anthony and Paul. How's it going?
Hey, Randy. How's it going?
Good. It seems like you booked, I think, four MRs on time charters. Can you provide some more color on that 27% of MR revenue days booked on time charter? Maybe the rates and the tenor of those. Also looking at your rate guidance, seems like the chem tankers continue to outperform the MRs. Why is that, and when do you expect those MRs to inflect above the chems?
Okay. I think the way we report sometimes can be a little bit it's just the math. We have, for example, the spot trading ships are roughly 40%, 50% through the quarter, but for the ships out on time charter, we know the whole quarter, right? I think if you add those together, it's looking like a bigger number somehow.
Yeah.
The reality is it's 20 out of 19 or 20 ships.
Exactly. Randy, so we've got 50% fixed at, so the way we look at it, halfway through the quarter at $11,000 a day. Obviously, there's four ships then who are fixed right through the quarter. I'm not going to disclose the rate because that's market confidential. The market rates for MRs in the first quarter were around somewhere between $13.5 and $14 and a bit. That would be the rates that we fixed at. Yeah, you're 50%+ whatever four ships you have for the remaining six weeks, if that makes sense.
Yep. The duration on those charters? I know the rates you're saying confidential, but are those normal one year, 12-month charters?
They're six months to one year with no options.
Got it.
And then [crosstalk] j ust also, when we [crosstalk] talked about the quarter to date, we were not adding the full quarter of the time charter days in that. It's just a pro rata share against the spot ships.
Oh, okay. That makes sense on the number then. I guess second question. Fourth quarter, you repurchased around $300,000 worth of shares. Didn't purchase any here in the first quarter. Your net asset value is still over six, if not seven. How do you view share repurchases here at the kind of current share price level?
Good question, Randy. I guess first off, in terms of the first quarter, we were obviously working on the e1 Marine transaction. We got to finish the documentation, there's no ability to buy back shares. I think we've been very clear at the outset the priorities on capital allocation. They remain debt reduction and financial strength and continuing to manage through the risky markets as we see them. The investment in e1 was, as Anthony mentioned, $6 million in capital outlay. We think that's a potentially high return investment. For us, the capital allocation priorities remain unchanged, and to the extent that there are opportunities to kind of take interesting investments, we look at that. Share buybacks, it's there. It's a tool in the toolbox, no immediate plans to kind of move aggressively on that front.
Got it. All right, well, I'll turn it over. Thanks so much.
Thanks, Randy.
Our next question will come from Magnus Fyhr with H.C. Wainwright. Please go ahead.
Thank you. Good afternoon, guys. Just a question here, if I just confirm what I heard on the call. Did you mention that there's no capacity available until 2024? Is that just the Korean yards or is that overall? What are you basing that on?
Well, yeah. Paul, do you want to explain the 2024?
Yeah. That's the indications from ship brokers today. If you wanted to do a series of ships, that's where you're looking at. I'm sure if you look for a onesie and twosie order, you could probably get them earlier. Generally, the feedback from the main yards in the kind of top-tier yards is that capacity is booked out for extended period of time.
When's the last I mean, I haven't seen that in a long time, but when's the last time there was a 30-month lead time for an MR delivery?
Well, I think Paul's comment may have been misunderstood. Okay. I mean, when I've talked to S&P brokers, the amount of ordering activity taking place at the moment, largely with containers, but also gas and bulkers, is huge, and a lot of it hasn't been announced yet. It's spreading down to sizes which are typical MR type of builders and berths. Basically feeder container ships and mid-size gas carriers. In these kind of core MR shipbuilding yards, it seems like based on what we're hearing anecdotally, but not formally reported yet, they're filling up rapidly. I think the point that Paul was trying to make is that if you want to order a long series of ships, let's say you wanted to order six or eight MRs or something, that's going to extend into 2024.
All right. Thanks for [crosstalk].
Another point a broker made to me this morning, which is interesting, and we know this but you forget, that when container ships are ordered, they're never ordered in ones and twos. It's always for a string. These are large orders.
All right. Well, thanks for clarifying that. Just a second question on the 260 product tankers that's over 20 years old, that you expect to be scrapped over the next five years. I mean, how much do they really play into the markets? I mean, aren't they already kind of a two-tiered market where these won't really affect the market and the more interesting part would be look at the, I guess, the 17% of the fleet that's between 15 and 19?
Yeah, I mean, it's a knock-on effect. If one of the really old ships gets scrapped, that operator will typically buy a newer one to replace it, kind of taking it out of the mainstream pool, if you will. There's a very active market for MRs around the age of 15, that are being bought by those kind of people that have then are scrapping the older ones.
Okay. Just last question then. It looks like the operating expenses have come down, or you're managing them very well. Any additional cost for COVID here? I mean, with crew changes.
Yeah, it's slight. It's $100, $200 a day, something like that. We do think that the protocols that are having to be put in place now are going to basically result in more crew days, if you will. The process of quarantining and arrival at a crew change port and quarantining again, getting on board. We have to pay them all the way, from when they basically check in. That's going to increase a little bit, but it's max $100, $200 a day.
Okay, great. That is all from me. Thanks.
Yep. Thanks, Magnus.
Once again, if you'd like to ask a question, please press star then one. Our next question will come from Ben Nolan with Stifel. Please go ahead.
Hey, Anthony and Paul. Hope you guys are well. I got a couple of things. Let me start with the e1, and I appreciate that it's still in the process of being finalized, but I'm curious if since you've made the announcement and it's obviously pretty public, what kind of any incremental interest you're seeing or if there's been any early wins or any update as to sort of how things are progressing even though it's not officially open yet?
We're still putting the ink down on paper, but we hope to close it in the next couple few weeks. We've hired a managing director and a commercial director for the JV. The staffing is well underway. They're great people. We're in the process of class approval for the system for deployment to vessels. Without being able to disclose any great detail, there are a lot of discussions going on with potential users. This is not going to take off like a bottle rocket in a matter of months. This will take time. We hope to have a clearer picture of the addressable market. Well, we do already theoretically, but it's kind of proving it out toward the end of the year, and we're also working on, hopefully around that timeframe, having demonstration units ready to deploy. That's where we are at the moment.
All right. That's helpful. Sort of connected to that, obviously, or I believe what this contemplates is methanol quite a lot, which is an area that is very close to where you guys are, but as long as I'm not mistaken, is not an area that you're currently in. Is that something that you aspire to do and something that we should be on the outlook for going forward?
Yeah, I think methanol as a cargo is the largest commodity chemical cargo. It's 80 million tons a year, which is like 3.5% of oil demand. Even though it's not produced from oil, it's a big chunk. Typically, it's shipped in stainless steel or zinc-coated ships, which we don't have at the moment, but we could in the future. Also sometimes MarineLINE or Interline 9001 is used, but that can be sometimes problematic. It's not a cargo that we currently ship. We also don't ship sulfuric acid or things like that. It is a component of aggregate chemical tanker demand, and I think in a more general sense is, if the demand for methanol grows, that'll help the overall commodity chemical market in an aggregate sense.
Don't know if that answers the question, but I would expect at some point we will be shipping methanol, but it's just in the context of, it's just another cargo that you can carry, providing you with more trading options.
Okay. Let me lastly circle back to something that Jonathan Chappell was talking about, again, sort of appreciating that none of us really knows, when you're sort of doing the back of the envelope math as to sort of when things can rebalance. Let's just take the IEA data, for instance, obviously there's an upward trajectory for oil demand, it doesn't get back to pre-COVID levels until sometime next year. At the same time, the product tanker fleet has grown by 3% or so since all of this started. How do you get comfortable with a recovery, let's say, in the back half of this year?
What sort of is the tipping point that says, "Okay, well, maybe absolute oil consumption is maybe still a little bit less and the fleet's a little bit bigger, but that doesn't really matter because X." Sort of fill in the blank. What tips the scales, do you think?
Well, I think X could be a few things that I believe I've already mentioned, but the refinery shifts that have continued to take place and even accelerated in the pandemic. China export volumes, the reemergence of the impact of IMO 2020 on demand, and just overall trade complexity, stimulus spending, and the fact that very often rapid economic growth can be disruptive in terms of cargo movement. That could create its own element of demand, but that's not long-term.
Okay. Collectively, that could be or should be enough, right? Like that gets you there in terms of just making the math work.
Yep.
Okay. All right. I appreciate it. Thanks, guys.
Yep. Thanks, Ben Nolan.
And this does conclude our question and answer session, also concluding today's call. The conference has now concluded. Thank you for attending today's presentation. At this time, you may now disconnect your lines, and have a great day.