18 February 2010 19:51 [Source: ICIS news]
HOUSTON (ICIS news)--Struggling Norwegian shipper Eitzen Chemical has seen a shift in chemical production this year from the US and European Union (EU) to the Middle East, the company's top executive said on Thursday.
Eitzen Chemical CEO Terje Askvig said in an earnings presentation that the shift could create "interesting consequences" for chemical tankers and arbitrage trading.
Askvig said that, even though Eitzen's average daily rates for vessels and the value of its fleet had plummeted, the company's recent debt refinancing had effectively cleared the decks for the company to deal with what he called a "normal bad market."
"Not what we saw in 2009," Askvig said. "That wasn't a normal bad market, that was just an awful market. So we're hoping for a normal bad market in 2010. What we saw in 2009, really, was off the charts."
Eitzen's financial charts for 2009 showed a loss of $98.5m (€71.9m), compared with a loss of $345.7m in 2008.
Askvig acknowledged that the company's overall debt level - more than $1bn - remains high. But he noted that the refinancing Eitzen obtained is favourable. The shipper does not have to make any loan payments until the last quarter of 2012 and, based on its cash levels, could extend any loan payments to mid-2014.
The debt also was a factor in a deal struck by Eitzen's parent company, Camillo Eitzen, last October with Indonesian shipper Berlian Laju Tankers, which would have created the world's largest chemical shipping firm. But that deal has encountered regulatory obstacles.
Camillo Eitzen announced in late January that the deal could be completed by mid-June of this year.
Moving back the debt repayment for Eitzen Chemical also enables the shipper to focus on the dramatic downturn in chemical production over the past two years, Askvig said.
Since the final quarter of 2008, Eitzen's time-charter rate on its fleet has dropped by 28-38%, depending on whether the ship is smaller than 30,000 dwt (deadweight tonnes) or larger.
The rate on smaller vessels in the past two years has dropped from $10,762/day to $7,713/day now, according to Eitzen. The rate on vessels above 30,000 dwt has fallen even more, by almost 38%, to $10,434/day from $16,791/day.
Askvig said the sub-par chemical market was reflected in the value of Eitzen's fleet of 81 ships.
"The total value of the fleet has fallen over 50% since the peak in 2008," he added.
($1 = €0.73)
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