[ID] => 10024
[post_author] => 34
[post_date] => 2018-08-25 10:05:50
[post_date_gmt] => 2018-08-25 09:05:50
[post_content] => The chemical tanker market has continued to weaken during the first half of the year; although some indicators are beginning to improve, the oversupply that has persisted for ten years now is still limiting the ability of operators to respond effectively.
The chemical tanker orderbook has now fallen to 8 per cent of the current fleet, which provides some optimism moving forward, but that decline reflects the fact that 20 new deepsea (18,000 dwt or more) ships were delivered in the second quarter, and only five were scrapped. On the other hand, new orders were limited to swing tonnage over 50,000 dwt, with no new contracts for core chemical tonnage appearing in the second quarter.
In the short term, chemical tanker operators are having to deal with two disruptive factors. The first is the weak market for clean petroleum product tankers, which is making more swing tonnage available to move chemicals. The second is the escalating trade dispute between China and the US, which has seen significant tariffs being imposed by both sides on all manner of goods, including a number of chemicals.
In its second-quarter report, Odfjell notes that only a few of the chemicals in scope of the new tariffs are shipped in bulk as liquids; moreover, tariffs on ethylene dichloride, lube oils and acrylonitrile from the US are not having any significant impact on chemical tanker demand, as Chinese importers are sourcing product from elsewhere, while US exporters are finding other markets in Asia.
However, Odfjell notes, Chinese tariff increases are now moving to other products shipped in large volumes by sea, including methanol and ethylene glycol; again, though, China has alternative sources for these products, particularly methanol, with Trinidad due to bring a major new export plant onstream in the first quarter of 2019. “We therefore currently do not expect any major negative impact on volumes shipped – and perhaps it may even increase demand for regional distribution in some trades,” Odfjell says. It also notes that, even with increased tariffs, low feedstock costs in the US will probably keep US-produced ethylene glycol competitive in Asian markets.
BETTER THAN THE REST
Against this backdrop, Odfjell has managed to maintain its level of financial performance in its chemical tanker operations. Second-quarter revenues of $209.0m were only slightly behind those of the prior quarter and virtually flat compared to the year-earlier figure. EBITDA of $28.0m was up on the first quarter’s $26.9m, although behind the $30.5m recorded a year ago.
The quarter-on-quarter improvement in EBITDA is noteworthy given overall market conditions and reflects improved performance in Odfjell’s portfolio of contracts of affreightment (COA), which enjoyed higher nominations and stronger volumes. It also reflects the successful implementation of cost control measures, as well as the ongoing restructuring of its fleet and vessel ownership profile.
During the last quarter it took delivery of the last of the 25,000-dwt stainless steel tankers that now form a 15-strong pool with CTG. In the second half of the year it will add the last of the ‘super-segregator’ vessels that form part of its arrangement with Sinochem; another ten stainless steel carriers are due to be added between now and the end of 2020.
[post_title] => Odfjell: Brighter later
[post_status] => publish
[comment_status] => open
[ping_status] => open
[post_name] => odfjell-brighter-later
[post_modified] => 2018-08-25 10:05:50
[post_modified_gmt] => 2018-08-25 09:05:50
[post_parent] => 0
[guid] => https://www.hcblive.com/?p=10024
[menu_order] => 0
[post_type] => post
[comment_count] => 0
[filter] => raw
Odfjell's strategy has allowed it to out-perform what is still a generally weak chemical tanker market, though some relief is expected next year