Global shipping leader Odfjell

GLOBAL SHIPPING LEADER

Norwegian Odfjell ASA is a leader in the transportation and storage of bulk liquid chemicals, acids, edible oils and other special products. Industry Europe looks at its operations.

Norwegian chemical transportation and storage company Odfjell ASA has unrivalled expertise in the shipping of complex chemical products. The company transports around 20 million tonnes of chemicals a year from everyday chemicals to high value, sophisticated products.

Odfjell’s specialised fleet consists of about 80 ships. The company also has three newbuildings on order. The total capacity of the current fleet is around 2.2 million dwt. A gross revenue of USD 1028 million was generated for last year (2013).

Looking back

Established in 1916, over the decades Odfjell grew in the business of transportation. In the 1950s the company began to focus on the transportation of specialised cargoes, such as chemicals and liquid gases. In the early 1960s it entered into a cooperation with WestfalLarsen & Co A/S and went on to operate as Odfjell-Westfal-Larsen (OWL) until late 1989.

In 1986, the company was listed on the Oslo Stock Exchange with the Odfjell family maintaining a controlling stake. Then in 1990, Westfal-Larsen and Odfjell parted company with Odfjell buying out its partner.

“In 2000 there was another major development for us,” says a company spokesperson. “We merged with Seachem to form the largest chemical tanker operator.” A big portion of the company’s ships today are stainless steel and this gives it a great deal of flexibility in terms of cleaning, safety and quality.

Global service provider

Headquartered in Bergen, Norway, the company’s current operations are fully integrated with in-house functions for chartering, operations and ship management. Major trade lanes are from the US and Europe to Asia, India, the Middle East and South America. In addition, there is a considerable trade between the US, Europe and South America.

Seagoing transport from the Middle East Region to destinations both in the East and

in the West is increasing as new production capacity is being developed in this area. Over the past few years there has also been a large production increase in the Far East. A considerable share of this volume goes to overseas markets.

Volumes shipped regionally are steadily increasing, particularly in the Asia Pacific region. As end-users of petrochemicals require products delivered on shorter notice and with less lead-time, the major petrochemical producers are building production complexes closer to their markets. The company’s largest regional operation is in Asia, where 13 ships are operated out of Singapore. Furthermore, it has seven ships employed in the inter-European trade and six ships along the coasts of South America.

New partnership

In May 2014 Odjfell entered into an agreement with affiliates of Breakwater Capital and Oak Hill Advisors to form a liquefied petroleum gas and ethylene shipping joint venture. At the same time the company announced that it has exercised its option for construction of four 22,000 cbm LPG/E gas carriers at Nantong Sinopacific, scheduled for delivery between September 2016 and June 2017. The contract price in total was in the region of USD 200 million.

In the LPG/E gas carrier segment, Odfjell currently owns and operates two 2008-built 9000 cbm vessels, has four 17,000 cbm vessels under construction at Nantong Sinopacific, scheduled for delivery between October 2015 and May 2016, and the option for four vessels.

In accordance with the agreement, Breakwater and Oak Hill Advisors have jointly agreed to invest approximately $50 million as consideration for a 50 per cent equity interest

in Odfjell’s LPG/E business. Odfjell’s aim is to work with its partners and build new partnerships with other first-class operators to create a leading LPG/E shipping platform founded upon second-to-none operational excellence, a modern and eco-friendly fleet and a longterm market perspective.

Jan A. Hammer, president and CEO of Odfjell, said of this move: “Odfjell is delighted to have Breakwater Capital and Oak Hill Advisors as its partner in the shipping segment of LPG and ethylene. Together, we will enhance our growth opportunities and broaden our capabilities.”

Terminal activities

The tank terminal business contributes a good deal to Odfjell’s positive results. It has direct investments in tank terminals in the Netherlands, the US, Singapore, Korea, Belgium, Oman, Iran and China. It has recently been expanding its tank terminal activities. For example, a new tank terminal in Tianjin became operational this year.

Furthermore, the company cooperates with another 11 terminals in South America and one in Canada. These tank terminals are partly owned by related parties. Its terminal business alone generated a gross revenue of more than USD 129 million in 2013.

“We have a strategy to expand the tank terminal activities along Odfjell’s major shipping lanes,” adds the company spokesperson. “We also focus on strategic ports in newly industrialised countries, in order to improve the development of chemical markets. In addition to being profitable investments on a stand-alone basis, our tank terminals also play an important operational role in our cargoconsolidation programme to reduce the time our ships spend in port.”

Commercially, the combination of shipping and tank terminals gives Odfjell an excellent position to offer complete logistical packages to its customers. The demand for combined service has steadily increased as a result of the industry’s ongoing pursuit of improving efficiency in the supply chain. n