Base oils 2013: Odfjell to boost storage capacity

15 February 2013 09:52  [Source: ICB]

Norway's chemical transportation and storage specialist Odfjell is nearing completion of a feasibility study into construction of a greenfield storage terminal in Le Havre, France.

The study is due to be completed in March, and the company then hopes to sign the site reservation by around 1April, provided a final investment decision is made following the results.

Carl Fredrik Odfjell, vice president of business development and project management at Odfjell Terminals, says that total investment may reach a significant amount if the company enters into the project.

Container ship Darren Hillman

 Darren Hillman

Shipping profits could be dead in the water for some time to come

The bulk liquid terminal, which will cater for petrochemicals and petroleum-related products such as base oils, will be located on a site of around 30ha (74 acres) along the Grand Canal Maritime which the port authority has put up for tender.

The facility will be built in stages: the first phase will have a capacity of up to 200,000m3, and commercial operation could begin in 2017.

The storage operator will also have to invest in some marine infrastructure and is currently studying various alternatives.

"We are looking at one or two jetties. The number of berth positions will be of key importance and we are considering two deepsea berths with a draught of 14-15m," says Odfjell.

An investment like this is of strategic importance for Odfjell, which wants to strengthen its presence in Northwest Europe's three largest ports for chemical liquids and specialty fluids, namely Le Havre, Rotterdam (the Netherlands) and Antwerp (Belgium).

Odfjell comments: "There is a strong chemical cluster in Le Havre and we have major customers there. This terminal will give us the opportunity to work closer with global customers."

He adds that there is a lot of opportunity along the Seine, and the port's rail connection also gives access Europe. "We hope to capture some of that business," Odfjell says.

The company is continuing to look at investment opportunities in Europe, although not aggressively admits Odfjell given the state of the economy.

"We feel this opportunity in Northern Europe is quite unique and we would now like to grow in other European areas, perhaps in the Baltic or Mediterranean."

Reflecting on the past year, Odfjell says that demand has slowed down and there has been a lot of backwardation in the market, which has deterred traders from taking positions. Optimistically, he says: "We hope there will be growth this year but there remains uncertainty in the tank terminal storage market."

SHIP OWNERS STEER DIFFICULT COURSE IN OVERSUPPLIED MARKET

The outlook for the chemical shipping sector does not make comfortable reading. Ship owners are now entering their fourth consecutive year of poor financial results with no improvement expected this year.

As the greater proportion of base oil cargoes are under 10,000 tonnes and are therefore well matched to carriage by chemical tankers, trends in this market will influence the base oils industry.

Base oil shippers will be competing for vessel space with cargoes such as palm oil, biodiesel and ethanol, as well as various other commodity chemicals.

Le Harve port Le Harve

 Le Harve

Despite poor trading conditions, the net supply of tonnage continues to grow with more new ships added to the fleet in 2012 than were scrapped, according to Adrian Brown, senior market analyst with UK shipbroker Simpson, Spence and Young (SSY).

He says supply will continue to grow this year before potentially falling sharply in a couple of years' time as fewer ships are on order in 2014-2015.

Statistically, total demand for chemicals and oil continues to rise, albeit at very low levels, which should be good news for ship owners, says Brown. But this demand is regional and can fluctuate considerably. For example, Asia may be active but this is little consolation for shippers in Europe and the US who are unable to relocate their vessels.

Also, it is not necessarily the higher growth regions which are seeing the new ships.

On today's freight markets, a 20,000dwt (deadweight tonne) vessel will be lucky to gross $16,000/day (€12,000), and realistically will be making $12,000-14,000/day, says Brown. "A ship owner has to clear $27,000/day minimum before even whispering the word profit, which means a loss of $11,000-16,000/day, or $4.0m-5.5m every year," he states.

A major factor in the poor performance of many chemical routes, apart from the excess tonnage, has been price volatility in both the US Gulf and Europe. Brown says west and eastbound transatlantic trade was disappointing in 2012.

He believes the reason there has been fewer shipping bankruptcies than have actually occurred, is because the banks have underwritten the vessels and face losing millions on the assets which they are unable to sell in the current economic climate.

There is no doubt that the outlook for shippers remains grim in 2013. How many will weather the seemingly never-ending economic storm is anybody's guess.

  • Elaine Burridge is a freelance writer, with wide experience of covering chemical logistics and the supply chain, and product profiles. She was for many years an editor on ICIS Chemical Business

By: Elaine Burridge
+44 20 8652 3214



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