Odfjell anticipates a healthy 2021

BANNER YEAR

MARKET • ODFJELL IS EXPECTING RECORD-SETTING RESULTS FOR 2020 AND ANTICIPATES THE GOOD TIMES CONTINUING THROUGH 2021, THOUGH IT IS ALSO ALERT TO POTENTIAL RISKS

THE FINAL FIGURES are not yet in but Odfjell reckons that 2020 will see it post its best result in 12 years in terms of chemical tanker operations. It expects overall revenues of more than $1bn with operating profit doubling from the 2019 level to around $125m to $130m.

That positive performance was delivered despite the Covid-19 pandemic and its attendant lockdowns, travel restrictions and business disruptions. Large parts of the chemical tanker market were largely unaffected and, particularly during the second

KRISTIAN MØRCH IS OPTIMISTIC FOR 2021 BUT AWARE

THAT THERE ARE ECONOMIC RISKS AHEAD quarter, thrived as chemical customers built safety stocks. The second half also delivered positive results and Odfjell is expecting this trend to continue through 2021. Speaking to Shippingwatch last month, Kristian Mørch, Odfjell’s CEO, said he had an “optimistic view” of the market but that the company will remain alert to market conditions.

Away from demand-side strength, a significant underlying factor behind the market’s performance in 2020 was the low level of newbuilding activity and the comparatively small number of new ships entering the fleet. Tanker companies remain hesitant of investing in new tonnage, being unsure of the best choice of technologies to prepare their new ships to comply with increasing environmental requirements. With chemical tankers in particular being expected to trade for 25 years or more, ships ordered today will have to be able to meet emissions and efficiency standards that perhaps have not been defined. To do so, they may have to employ propulsion technologies that are not yet available, or not at the scale needed for oceangoing ships.

That supply-side picture is unlikely to change in 2021, with the orderbook still at historically low levels. Meanwhile, chemical tanker demand was higher than expected during much of 2020 and, if the Covid-19 pandemic is brough under control with the help of vaccination programmes being rolled out around the world, the global economy could well accelerate in 2021, bringing further growth in demand for chemicals and, hence, for chemical tankers.

IN A GOOD PLACE Mørch said he was relieved at the end of 2020 and entered the new year with “a fundamental optimism”. Nonetheless, there is a risk of a major correction in the global economy, with several major countries now shouldering massive amounts of debt, interest rates around zero and potentially inflated stock markets around the world. If those aspects combine to cause a downturn, it is difficult to imagine that the chemical tanker market will not be affected. As a result, Odfjell is planning to remain disciplined in its business and to continue to work to reduce its risk exposure.

Happily, Odfjell has now completed its fleet renewal programme and, partly through a new pool collaboration with Navig8 Chemical Tankers and TRF, has almost achieved its target of commanding a fleet of more than 100 tankers. As such, Odfjell has no uncertainties in its investment plans and can concentrate on operations.

Mørch says there is a “sweet spot” in terms of fleet size, when having enough tonnage at Odfjell’s disposal provides flexibility in ship deployment and the ability to grasp trading opportunities, but not so many ships that the company becomes its own worst competitor. As he says, Odfjell is in a “comfortable place” and has no wild ambitions to grow any further. www.odfjell.com