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BACK IN THE SWING MARKET • THE CHEMICAL TANKER SECTOR IS RETURNING TO SOMETHING LIKE NORMALITY, WITH ODFJELL REPORTING RESILIENCE DESPITE WORRYING SIGNALS FROM THE GLOBAL ECONOMY ODFJELL TANKERS HAS reported revenues of $229.7m for the third quarter 2020, down on the $234.6m achieved in the previous period but 7.2 per cent ahead of the year earlier. EBITDA also fell but, likewise, was well up on the 2019 figure. The third quarter is often slow and Odfjell says spot rates responded, while this year the second quarter had also been boosted by what it says were “several fixtures at attractive rates in the clean petroleum product segment”, that did not reappear. On the other hand, renewals under contracts of affreightment (COAs) were up on average by 4.5 per cent compared to the previous period, continuing the positive trend over the past 18 months. Odfjell CEO Kristian Mørch says the third quarter was “impacted by seasonality and a high number of drydockings” but, overall,
HCB MONTHLY | DECEMBER 2020
he says he is “satisfied with our ability to continue to report positive results in this challenging environment”. Alongside the usual seasonal slowdown, re-stocking seen during the second quarter meant that inventories remained high and there was a lack of storage capacity, discouraging trading. This was compounded, particularly in Asia, by increased competition from swing tonnage coming in from the petroleum trades. MARKET MOVES The chemical tanker market has proven to be resilient so far during the 2020 downturn in the global economy, Odfjell says, but a recovery in economic conditions will be a key factor in ensuring higher chemical tanker demand over the coming years. The International Monetary Fund (IMF) is projecting global GDP to shrink by 4.4 per cent this year but is forecasting growth of 5.2 per cent in 2021. IMF expects the speed of recovery to differ between regions, with large chemical importers in Europe and Asia to doing better than the larger chemical exporters. This should lead to continued regional supply and demand imbalances and continued stimuli for seaborne trade in chemicals.
The Covid-19 crisis has had a particularly significant impact on chemicals used in the automotive and construction industries but, Odfjell says, there seems to have been a gradual recovery in these sectors, the emergence of a new round of infections notwithstanding. Continued recovery in these industries will be key to normalisation in the chemical trades. The recent trend of reduced competition from swing tonnage reversed somewhat during the third quarter but, Odfjell says, this should be a temporary feature. “While we expect a short-term pickup in swing tonnage carrying chemicals and vegoils, we do not expect competition to become as severe as the last couple of years,” as the fundamentals for clean product and crude oil tankers look to be improving over the near term. Furthermore, appetite for newbuilding in the chemical tanker sector remains low and limited supply growth over the coming three years should be a key factor in strengthening the chemical tanker market. Only two operators placed newbuilding contracts during the third quarter, partly representing replacement tonnage. With chemical tanker demand forecast to grow at an annual average of 3 per cent between 2021 and 2023, and supply growth limited to 1 per cent per year, the fundamentals for the chemical tanker market seem optimistic. www.odfjell.com
