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Odfjell swings to net profit on improved chemical tankers market

September 23/2020

MOSCOW (MRC) -- The continued revival of the chemical tanker market has driven a strong rise in second-quarter net earnings to USD30.9 million for Odfjell (Bergen, Norway) from a loss of USD10.2 million in the prior-year period, reported Chemweek.

EBITDA rose 44% year on year (YOY) to ÃÛÂ81.9 million on sales that rose 4% to USD252.4 million. CEO Kristian Morch says the “continued firming” of the chemical tanker market and a firm spot market drove the results, but that COVID-19 “continues to cast high uncertainty about the future.” The company expects the third quarter to be impacted by more usual seasonal trends and says it anticipates reporting “weaker, but still positive, results in the next quarter,” Morch says.

The chemical tankers segment reported EBITDA of USD73.9 million, up almost 50% YOY, on a 4% YOY rise in sales to USD234.6 million, due mainly to stronger spot rates in the quarter. A migration of swing tonnage towards the clean petroleum products (CPP) market led to reduced competition for chemical and vegetable oil cargoes, Odfjell says. The company shipped 3.2 million metric tons of product in the second quarter, in line with the first quarter of the year. A reduction in tanker supply exceeded a marginal drop in demand, mostly from the automotive and construction sectors, it says. The global chemical tanker orderbook stands at 4.1% of the current fleet, with no new orders for core chemical tankers concluded during the quarter, it adds.

Odfjell says it is forecasting a scenario “where chemical tanker demand will continue its current disconnect from global GDP growth, driven by the wide variety of cargoes transported and the majority of end-use applications being relatively resilient to an economic downturn of this type.” A recovery in worldwide demand led by Asia-Pacific looks set to support demand, with a gradual economic recovery noted across most industries and geographies “pivotal for chemical tanker demand. We expect to see continued demand growth from packaging, food related industries, home care and pharma, health and hygiene and electronics and various other consumer goods,” it states. This is expected to mitigate negative demand growth from the automotive and construction industries, it notes.

The company’s terminals business in the second quarter was marked by oil price contango, COVID-19, and the sale by Odfjell of its joint and indirect stake in its China terminal business. The sale of the stake “represents another milestone in the restructuring of our terminal portfolio and is in line with our strategy to focus on chemical terminals where we can harvest synergies with Odfjell Tankers,” it says. The sale resulted in a net cash gain of USD27 million.

Underlying demand for storage continues to be strong due to COVID-19, further accentuated in the quarter by the oil price contango, with the company’s terminals reaching an average commercial occupancy rate of 97%. A notable drop in handlings at its terminals in the US and Antwerp, Belgium, was in part the result of preventive pandemic measures, as well as weaker downstream demand in sectors such as automotive and construction, it says. Although lower activity impacted throughput and service fees, a substantial share of the terminal business’ revenues come from rented capacity based on take-or-pay and other throughput, highlighting the resilience of the terminals platform, it says. The overall terminal occupancy rate is expected to remain high going forward, with the company seeing “some signs of recovery in activity levels in the US in the third quarter.” The Antwerp terminal also commissioned 12,700 cubic meters of new, fully automated capacity for specialty chemicals storage during the quarter, it adds.

Odfjell says it plans capital expenditure of USD38 million for its terminals business, the majority relating to the expansion of its Houston terminal. Planned maintenance spending will amount to USD33 million, it adds.

As MRC informed earlier, in July, 2020, Odfjell (Bergen, Norway) says a significant expansion of its European chemicals storage capacity has been completed at the port of Antwerp, Belgium.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, propylene, ethylene, petrochemistry, Belgium, Norway, Russia.
Category:General News
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