the impact of rising freight rates on olefins ... · the impact of rising freight rates on olefins/...

The impact of rising freight rates on olefins/

petrochemical industry

OLEFIN ASIA CONFERENCE

SHANGHAI, 6-7 MARCH 2014

B Y : D E A V Y A R O N S I N A M B E L A

T M I G R O U P

The impact of rising freight rates on olefins/ petrochemical industry

A. Challenges in olefins/petrochemical logistics a) Commodities highlight

b) Bunker and Crude index

c) Vessel operation costs vs. freight rates

B. Freight forecast on olefins/petrochemical products

C. Shipping strategic options for olefins/petrochemical players

2

0

2

4

6

8

10

12

14

16

Mill

ion

s

National Ethylene Capacities

2012 2013

CHALLENGES IN OLEFINS/PETROCHEMICAL LOGISTICS 3

Sources: OGJ survey data

0

5

10

15

20

25

30

35

40

45

50

Asia-Pacific EasternEurope

Middle East,Africa

NorthAmerica

SouthAmerica

WesternEurope

Mill

ion

s

Regional Ethylene Capacity Breakdown

Jan 1, 2012 Jan 1, 2013

Commodities highlight

Commodities highlight


Source: Skagen SE, Korea port agents Source: Skagen SE, Indo port agents

Source: Skagen SE, External

Source: itc-chem.com

Source: DeWitt

Source: China Customs

Asia Ethylene Trade Overview

Bunker and Crude index


570

620

670

720

770

820

870

920

970

1020

1070

70

80

90

100

110

120

130

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13

Bunker Fuel, USD/MT Crude, USD/bbl

Source: Bloomberg

Crude Oil Brent (left axis)

Crude WTI Spot (left axis)

Bloomberg Weighted Average 380cST Bunker Fuel Price (right axis)

Oceanconnect Fujairah MGO cSt Bunker Spot Price (right axis)

Bunker and Crude

Bunker index


(Source: BunkerWorld, BunkerIndex)

MFO 380 price index MGO price index MFO 180 price index

Voyage Calculation

7

Sources: Netpas

Vessel’s Operation costs vs. Freight Revenue

◦ Fixed costs ◦ Vessel’s loan

◦ Vessel’s Insurances

◦ Docking costs

◦ Depreciation

◦ Others (Crew, Technical, ISM, Safety & Nautical, Adm)

◦ Variable costs ◦ Bunker Costs

◦ Suez Canal*

◦ Armed Guard*

◦ Port charges

◦ Fresh water, tank cleaning material

◦ Others

*Add’t costs required when vessels passing Suez canal

*Add’t Armed guard required when vessels passing piracy areas


(Sources: Internal and External Data)

Vessel’s Operation costs

9

71% 3%

0%

1% 17%

8%

Variable Costs - Monthly

Bunker

Port Charges

Fresh Water

Tank CleaningMaterialSuez Canal

Armed Guard

CHALLENGES IN OLEFINS/PETROCHEMICAL LOGISTICS

(Sources: Internal and External Data)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Fixed Costs - Yearly 12%

51%

2%

4%

22%

6% 2% 0%

1%

Fixed Costs - Monthly

Depreciation

Loan

Insurances

Docking Costs

Crew

Technical

Safety & Nautical

ISM

Administration

Piracy and Armed robbery incidents

10

(Source: ICC, IMB Piracy Reporting Centre)

11

Piracy and Armed robbery incidents

CHALLENGES IN OLEFINS/PETROCHEMICAL LOGISTICS

Pirates at Gulf of Aden


Pirates at Gulf of Aden


USS Farragut destroying a pirate ship in the gulf of Aden

14

Tanker’s being escorted by Turkish Navy


A. Challenges in olefins/petrochemical logistics

B. Freight forecast on olefins/petrochemical products a) Market Update

b) Freight forecast

C. Shipping strategic options for olefins/petrochemical players

15

Market Update

FREIGHT FORECAST ON OLEFINS/PETROCHEMICAL PRODUCTS 16

Source: Skaugen SE, and External data (excluding Iran)

Global Long Haul Ethylene trade by Export Region

Market Update


26%

44%

31%

27%29%

40% 41%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2012 2013

NORGAS ESE GASCHEM KOSAN NAVIGATOR OTHER

Market Share of Global LH Ethylene trade (kt)


Market Update


Global Long Haul Butadiene trade by Export Region (kt)


Market Share of Global LH Butadiene trade (kt)



Market Update

Freight Rates

20 FREIGHT FORECAST ON OLEFINS/PETROCHEMICAL PRODUCTS

Source: Internal and External data

Time Charter Rates – as per January – February 2014

12 Month TC Rates Monthly Rates Daily Rates

3000-3500 cbm S/R $290,000 - $315,000 $9,500 - $10,400

6500 - 7000 cbm S/R $430,000 - $470,000 $14,100 - $15.500

8000 - 8500 cbm Eth $515,000 - $585,000 $16,800 - $19,200

20,000 - 20,500 cbm S/R $815,000 - $870,000 $26,700 - $28,500

28,000 - 28,500 cbm $600,000 - $645,000 $19,700 - 21,200

30,000 - 35,000 cbm $780,000 - $850,000 $25,500 - $27,900

55,000 - 60,000 cbm $950,000 - $1,000,000 $31,200 - $32,800

75,000 - 80,000 cbm $1,100,000 - $1,300,000 $36,100 - $42,600

Freight Rates Forecast


Time Charter Rates Forecast 2014

12 Month TC Rates Monthly Rates Daily Rates Market Changes

3000-3500 cbm S/R $290,000 - $315,000 $9,500 - $10,400 Stable

6500 - 7000 cbm S/R $430,000 - $470,000 $14,100 - $15.500 Stable

8000 - 8500 cbm Eth $515,000 - $585,000 $16,800 - $19,200 Stable

20,000 - 20,500 cbm S/R $798,000 - $850,000 $26,200 - $27,900 By approx. 5%

28,000 - 28,500 cbm $600,000 - $645,000 $19,700 - 21,200 Stable

30,000 - 35,000 cbm $780,000 - $850,000 $25,500 - $27,900 Fixed

55,000 - 60,000 cbm $920,000 - $970,000 $30,200 - $31,800 By approx. 3-5%

75,000 - 80,000 cbm $1,078,000 - $1,270,000 $35,300 - $41,700 By approx. 2-6%

Source: Internal and Various Broker

Freight Rates

22

Ethylene Spot Rates as per December 2013 - March 2014

Quantity Load Discharge Freight

3000 - 5000mt

Intra Asia Southeast Asia USD 70-90/mt

Intra Asia Northeast Asia USD 70-100/mt

Southeast Asia Northeast Asia USD 130-180/mt

Southeast Asia Arabian Gulf USD 120-180/mt

Arabian Gulf Europe USD 170-200/mt

Arabian Gulf South Asia USD 100-150/mt

FREIGHT FORECAST ON OLEFINS/PETROCHEMICAL PRODUCTS

Source: Internal, ICIS and Various Broker

Freight Rates Forecast


Source: Internal , ICIS, Various Broker

Ethylene Spot Rates Forecast 2014

Quantity Load Discharge Freight Market Changes

3000 - 5000mt

Intra Asia Southeast Asia USD 70-90/mt Steady

Intra Asia Northeast Asia USD 70-100/mt by approx. 5-7%

Southeast Asia Northeast Asia USD 130-180/mt Steady

Southeast Asia Arabian Gulf USD 120-180/mt by approx. 5-10%

Arabian Gulf (AG) Europe USD 160-190/mt by approx. 5-6%

Arabian Gulf (AG) South Asia USD 95-140/mt by approx. 3-5%

24

Major Carrier

43%

26%

31%

Lauritzen-Kosan

Refrigerated 3,000 - 6,400 cbm

Ethylene 8,000-9,100 cbm

Pressurized 3,500 - 4,000 cbm

26%

22%

52%

Navigator


Ethylene 21,000 - 22,085 cbm


70%

23% 7%

Ultragas

Refrigerated 3,500-60,700 cbm

Ethylene 4,000-12,000 cbm

Pressurized 3,500 cbm

24%

35%

41%

Evergas / Solvang

VLGC 75,000 - 84,000 cbm

LGC 59,300-60,200 cbm

Ethylene 12600-17,100 cbm

8%

64%

28%

Gaschem


Ethylene 4,200 - 22,791 cbm


FREIGHT FORECAST ON OLEFINS/PETROCHEMICAL PRODUCTS


Freight Forecast


0 2 4 6 8 10 12 14 16

Trading Iran

NAVIGATOR

Other

ODFJELL

Solvang

Evergas

UNIGAS

KOSAN

GASCHEM

Eletson

NORGAS

No of ships

Fleet New Builds

CBM: 150K

CBM: 126K

CBM: 143K

CBM: 92K

CBM: 154K

CBM: 118K

CBM: 93K

CBM: 86K

CBM: 67K

CBM: 215K

CBM: 89K

Source: www.tradewindsnews.com; www.clarksons.net, Skaugen SE

New players entering Ethylene market

http://www.clarksons.net/


A. Challenges in olefins/petrochemical logistics

B. Freight forecast on olefins/petrochemical products

C. Shipping strategic options for olefins/petrochemical players a) COA vs. Spot vs. Time Charter

b) Recommendation & Conclusion

26

27

Shipping Terms

Advantages Disadvantages

COA

ONCE ALL TERMS & CONDITIONS ARE AGREED, NO NEED TO NEGOTIATE MAIN TERMS AND RIDER CLAUSES ON EVERY SHIPMENT.

CHTR HAS THE OBLIGATION TO PROVIDE VSSL W/ CGOES AS PER COA CONTRACT, USUALLY IN QTY OR WITH NO. OF SHIPMENT ON YEARLY OR ON MONTHLY BASIS.

CHARTERER HAS THE ABILITY TO PREPARE CARGO SALES PLAN IN ADVANCE, ONCE CGO HAS BEEN SCHEDULED, OWNER WILL ALLOCATE THE VESSEL

DURING COA CONTRACT, ALL TERMS AND CONDITION CANNOT BE AMMENDED UNTIL THE CONTRACT PERIOD ENDED.

FIXED TERMS & COND’T WILL GIVE CHARTERER ADVANTAGES IN ALLOCATING BUDGET FOR LOGISTICS EXP ON CERTAIN PERIOD OF TIME REGARDLESS ANY MARKET SITUATION

ALL NOMINATED LOAD & DISCH PORTS MUST BE STIPULATED INTO THE COA CONTRACT, INCLUDE THE FRT RATE, SHD CHRTR WISHES TO PERFORM SHIPMENT OUTSIDE THE COA AGREEMENT,IT WILL BE CONSIDERED AS SPOT VOY.

Time Charter

VSSL IS FULLY OPEN ALL THE TIME DURING THE TC CONTRACT PERIOD, AND CHARTERER HAVE THE ABILITY TO INSTRUCT THE VESSEL TO CALL ANY AREAS

CAN ONLY BRING THE VSSL TO SPECIFIC PLACES FOR LOAD/DISCH AS PER TC CONTRACT

CHARTERER HAVE THE ABILITY TO INSTRUCT OWNER TO ALLOCATE DEDICATED CREWS ON BOARD

TC RATES ARE NORMALLY EXPENSIVE DEPENDING ON VSSL SPECS AND AGE, AS MOST OWNERS’S CALCULATION ARE BASED ON INCREMENT ON FIXED COSTS, CREW, TECHNICAL COSTS DURING AND UNTIL TC CONTRACT ENDED.

FIXED TC RATE FOR CERTAIN PERIOD OF TIME, WITH CHARTERER OPT TO EXTEND THE TC CONTRACT

CHARTERERS HAVE TO PAY BUNKER, FW, TANK CLEANING MATERIAL, CREW INCENTIVES AND PORT CHARGES.

Spot

FREIGHT RATE USUALLY DEPENDING ON MARKET, SOMETIMES CAN GET CHEAPER FRT WHEN MARKET IS DOWN

WHEN MARKETS ARE GOOD, FREIGHT RATE USUALLY WENT UP

CAN SEARCH FOR THE BEST RATE W/ VARIOUS OWNER IN THE MARKET

VSSL AVAILABILITY IS NOT CERTAIN

CHTR OBLIGATION FINISHED AFTER SHIPMENT COMPLTED, ONCE ALL DOCS RECEIVED AND NO OUTSTANDING ON DEMMURAGE

MUST DO THE NEGOTIATION ON EVERY SHIPMENT, WHICH IS TIME CONSUMING

SHIPPING STRATEGIC OPTIONS FOR OLEFINS/PETROCHEMICAL PLAYERS

COA vs. Time Charter vs. Spot

Overview of Ethylene segment

28

LH Ethylene (8-23K cbm)

Evergas 19%

Solvang 23%

Gaschem 19%

Lauritzen-Kosan 11%

Unigas 5%

Navigator 9%

Odfjell 0%

Eletson 0% Sinogas

0%

Norgas 14%

COA

Evergas 9% Solvang

7% Gaschem 5%

Lauritzen-Kosan 12%

Unigas 9%

Navigator 9%

Odfjell 21%

Eletson 0%

Sinogas 21%

Norgas 7%

SPOT

Evergas 10%

Solvang 8%

Gaschem 16%

Lauritzen-Kosan

9% Unigas 22%

Navigator 20%

Odfjell 0%

Eletson 0%

Sinogas 0%

Norgas 15%

TC

SHIPPING STRATEGIC OPTIONS FOR OLEFINS/PETROCHEMICAL PLAYERS


Recommendation & Conclusion

29 SHIPPING STRATEGIC OPTIONS FOR OLEFINS/PETROCHEMICAL PLAYERS

Shipping Terms

Advantages Disadvantages

COA*

ONCE ALL TERMS & CONDITIONS ARE AGREED, NO NEED TO NEGOTIATE MAIN TERMS AND RIDER CLAUSES ON EVERY SHIPMENT.

CHTR HAS THE OBLIGATION TO PROVIDE VSSL W/ CGOES AS PER COA CONTRACT, USUALLY IN QTY OR WITH NO. OF SHIPMENT ON YEARLY OR ON MONTHLY BASIS.

CHARTERER HAS THE ABILITY TO PREPARE CARGO SALES PLAN IN ADVANCE, ONCE CGO HAS BEEN SCHEDULED, OWNER WILL ALLOCATE THE VESSEL

DURING COA CONTRACT, ALL TERMS AND CONDITION CANNOT BE AMMENDED UNTIL THE CONTRACT PERIOD ENDED.

FIXED TERMS & COND’T WILL GIVE CHARTERER ADVANTAGES IN ALLOCATING BUDGET FOR LOGISTICS EXP ON CERTAIN PERIOD OF TIME REGARDLESS ANY MARKET SITUATION

ALL NOMINATED LOAD & DISCH PORTS MUST BE STIPULATED INTO THE COA CONTRACT, INCLUDE THE FRT RATE, SHD CHRTR WISHES TO PERFORM SHIPMENT OUTSIDE THE COA AGREEMENT,IT WILL BE CONSIDERED AS SPOT VOY.

Time Charter

VSSL IS FULLY OPEN ALL THE TIME DURING THE TC CONTRACT PERIOD, AND CHARTERER HAVE THE ABILITY TO INSTRUCT THE VESSEL TO CALL ANY AREAS

CAN ONLY BRING THE VSSL TO SPECIFIC PLACES FOR LOAD/DISCH AS PER TC CONTRACT

CHARTERER HAVE THE ABILITY TO INSTRUCT OWNER TO ALLOCATE DEDICATED CREWS ON BOARD

TC RATES ARE NORMALLY EXPENSIVE DEPENDING ON VSSL SPECS AND AGE, AS MOST OWNERS’S CALCULATION ARE BASED ON INCREMENT ON FIXED COSTS, CREW, TECHNICAL COSTS DURING AND UNTIL TC CONTRACT ENDED.

FIXED TC RATE FOR CERTAIN PERIOD OF TIME, WITH CHARTERER OPT TO EXTEND THE TC CONTRACT

CHARTERERS HAVE TO PAY BUNKER, FW, TANK CLEANING MATERIAL, CREW INCENTIVES AND PORT CHARGES.

Spot

FREIGHT RATE USUALLY DEPENDING ON MARKET, SOMETIMES CAN GET CHEAPER FRT WHEN MARKET IS DOWN

WHEN MARKETS ARE GOOD, FREIGHT RATE USUALLY WENT UP

CAN SEARCH FOR THE BEST RATE W/ VARIOUS OWNER IN THE MARKET

VSSL AVAILABILITY IS NOT CERTAIN

CHTR OBLIGATION FINISHED AFTER SHIPMENT COMPLTED, ONCE ALL DOCS RECEIVED AND NO OUTSTANDING ON DEMMURAGE

MUST DO THE NEGOTIATION ON EVERY SHIPMENT, WHICH IS TIME CONSUMING

Somali Pirates in action

30

http://www.youtube.com/watch?v=hGoMiJgCsGI



THANK YOU FOR YOUR ATTENTION!

OLEFIN ASIA CONFERENCES

Shanghai, 6-7 March 2014

the impact of rising freight rates on olefins ... · the impact of rising freight rates on olefins/...

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