Odfjell SE - Chemical Tanker Industry Update
The chemical industry is considered an essential industry in most countries
Timing of outbreak and oil price collapse has neutralized the effect so far...
Prospects and market update
Covid-19 has so far had limited overall effect on chemical tankers as it has
impacted key areas at different times - COA volumes began to weaken end-1020
y/y growth in global port calls (total shipping)
-USA -Europe (5) Chima
22
Phase 1: China
21,3%
Phase 2: Europe
Phase 3: USA
22
22
The chemical
industry
20
20
18
16
14
18
18
16
16
14
14
12,3%
11,5%
12
12
10
10
10
8
7,2%
5,6%
6
2.5%
Globall
Global
Global
Global
Global
Global
import share.
export share
import share
export share
import share export share.
O The chemical industry is considered as an essential industry, therefore production was kept up and there was no immediate reaction to the pandemic
The pandemic accelerated in regions at different times has kept seaborne trade fairly resilient in the initial phases of the pandemic where pockets of demand was still found
O Exports of excess cargoes originally meant for domestic consumption mitigated reduced import volumes in the initial phase in both China and Europe
We started to see a weakening sentiment and volumes in our markets towards the end of the first quarter which could spill over to the 2nd quarter
We serve various industries. Some industries like pharma, home supplies and packaging has seen increased demand, some are unaffected, major consumers of chemicals like the auto and construction
industries are heavily affected. Therefore, the future development of these industries are key demand drivers to tum volumes in a positive direction
There are encouraging signs from China and it looks like Europe and the US are now starting to tentatively open up their economies. Still, the outlook and speed off a recovery in the global economy is highly
uncertain
Source Clarkson Platou Secuiel Saly, Spain, Germany, France, LO
Regional
outbreaks
Prospects and market update
Oil price drop improved Chemical producers' margins and has supported high
operating rates from producers demanding liquid chemicals
Chemical feedstock prices (USD/tonne)
Methanol producer margins
MTO, PE & PS operating rates % (China)
650
250
100
600
200
90
550
150
77%
500
100
50
450
400
350
01.09.2019
01.11.2019
01.01.2020 01.03.2020
- Europe
01.05.2020
MTO
Week
300
250
Ethylene Glycol producer margins
PET & PTA operating rates % (China)
200
150
800
84%
80
100
200
50
0
0
Jan-19
W-Jul-19
Ju-19
1-Jan-19 1-mal-19 1-Sep-19 1-jan-20 1-mal-20
-200
-Ethane US-Naphtha US Naphtha Far East
Еигоре
PTA
Week
Week
PET (Fiber grade)
O Drop in oil prices has reduced the major cost
advantage for gas based US chemical producers
Son Defel SE Argus
Source: Odfjell 1Q20 presentation
Feedstock
dynamic
-
The chemical industry has been considered an essential industry in most countries
O Operations has therefore continued throughout the Covid-19 outbreak
Some plant shut downs, reduced operating rates and deferred start-up reported
O China impact limited by Lunar holiday, export rebates and heavy port congestion
Europe impact limited by strong exports and a strong CPP market
O US impact has been fairly muted except exports to US and South America being weak
O Lower oil prices led to lower naphtha prices, the main feedstock for chemical production
This led to strong demand for liquid chemical intermediates into production of solids
O Asian producers were main drivers which supported deep-sea shipments
But US producers still produces better
margins than European and Asian producers
PET (Brad) - - 2010 Aug
Lower feedstock costs also for Naphtha has
kept operating rates in Asia/China high for
end-user products and supportive of liquid
chemical tanker demand.
Industry
diversification
O The chemical industry serves a wide range of products in our "everyday" needs
O This has supported chemical tanker demand before and looks to do so again
There are, and will be, both winners and loosers on a product specific basis from Covid-19
10
23
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