Odfjell takes advantage of market

GRAB AND GO

CHEMICAL TANKERS • SWING TONNAGE IS WORKING HARD IN CPP SO CHEMICAL TANKER OPERATORS HAVE THE CHANCE TO TAKE ADVANTAGE, AS ODFJELL’S LATEST RESULTS REVEAL

WITH TURBULENT OIL and commodity markets and the downstream demand effects of Covid-19, many logistics firms have started 2020 very badly, but that has not been true of the chemical tanker sector, if Odfjell’s first-quarter results are any reliable indication. Revenues were up 10 per cent on the previous year at $240.2m and EBITDA rose from $39.7m to $57.8m.

“The improved results are driven by higher spot rates and the impact from increased rates on renewed and new contracts of affreightment (COAs),” the company says. Higher bunker costs, up 25 per cent on the fourth quarter 2019, were more than offset by these higher rates and, Odfjell says, the impact of Covid-19 was limited to its regional fleet in Asia.

“Heightened volatility and uncertainty in our markets has shown the importance and resilience of our global platform,” Odfjell says. “We are utilising the flexibility of our vessels through cargo consolidation to secure best possible utilisation and also release capacity to target higher paying cargoes within bulk chemicals, vegoils and clean petroleum products (CPP).”

Indeed, it is the strength in the CPP market in recent months that has pulled swing tonnage out of the chemical markets that has helped support rates for sophisticated tonnage. On the other hand, the uncertainty delivered by the Covid-19 pandemic has presented some challenges, particularly through the closure of some ports, which has made voyage planning and cargo discharges unpredictable, along with the impossibility of performing regular crew changes. There has also been a delay

ODFJELL HAS HAD TO BE NIMBLE TO ADAPT TO CHANGES in construction of tanker newbuildings at the Hudong yard in China, although work has now restarted.

STRONG AT HEART The fundamentals of the chemical tanker market have remained strong, Odfjell says, with firm demand outstripping slowing net fleet growth. The global chemical tanker orderbook now stands at a respectably modest 4.9 per cent of the active fleet; during the quarter, ten new vessels were delivered and one scrapped, with three new orders placed.

Odfjell warns, however, that the Covid-19 pandemic could yet have an impact on demand for chemical tankers, as the effects on the global economy filter through. During the lockdown, there have been higher chemical exports from some regions and, with Asia expected to recover more quickly than the western hemisphere, Odfjell says it expects long-haul shipments to Asia to “provide some downside protection to tonne-mile demand”. Overall, demand for many chemicals remains strong, other than in the construction and automotive sectors, and the pace at which these industries recover will likely determine the duration of the slowdown in chemical demand.

The collapse in world oil prices has also benefitted many chemical manufacturers, although US producers have seen their competitiveness affected; however, Odfjell says, current prices remain supportive for a recovery in exports when demand returns.

The crude oil and product tanker markets are strong and expected to remain that way, particularly as a significant share of these fleets have been fixed on long-term storage contracts. This points to a further reduction in swing tonnage looking for chemical cargoes.

“We still expect tonne-mile demand to continue to grow, although at a reduced rate of 2 to 4 per cent on average until 2022, depending on the outcome of the pandemic,” Odfjell says. “This compares to a supply growth of 1 per cent on average in the corresponding period.” www.odfjell.com