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Our markets

Odfjell operates in a highly competitive global environment. Our markets are fundamentally exposed to the same dynamics as those of crude and product tankers. While we share the same directional market drivers as the highly commoditized crude and product tanker markets, the industrial component differentiates chemical tanker markets by being less volatile and more predictable. 

  • From a demand perspective, oil and gas and their respective derivatives are key as feedstocks to produce petrochemicals  
  • From a supply perspective, vessels carrying chemicals and oil products can often carry both, impacting the competitive environment across the segments  

 

Odfjell’s business model   

Our business model allows us to take advantage of short-lived opportunities, all while ensuring safety, quality, and stability in the long run.   

  • On the organizational side, our integrated global platform of commercial trading and technical ship management allows us to make well-informed strategic and tactical decisions, avoiding sub-optimalization  
  • On the vessel side, our large, flexible fleet, with its mostly stainless steel cargo capacity, can carry “anything liquid,” from edible vegetable cooking oils or wine to hazardous chemicals, acids, or fuels   


Together, this gives us with the expertise to carry the most specialized of chemicals, and the flexibility to adapt to rapidly changing market conditions. This provides income diversification and is invaluable to make our earnings less cyclical.  

 

Demand   

Demand for shipping is driven primarily by two variables; the volume of product and the distance it needs to travel. Seaborne chemical and vegetable oil volumes have grown steadily over the last few years, despite a string of challenges including inflation, muted downstream demand, and higher feedstock and production costs. At the same time, the average distance between sellers and buyers has grown due to sanctions and the disruption of key waterways.  

In the short to medium term, we expect demand to keep growing at a stable pace. Should the global economy pick up pace again, we might also see increased demand in downstream markets, leading to an increase in seaborne volumes.   

The outlook for chemical tanker demand is also stable in the longer term:   

  • The products we ship are fundamental to everyday life in the developed world   
  • Per capita chemical demand is low in the developed world, providing downstream growth potential  
  • Refineries adapt to decarbonization by producing a higher share of petrochemicals at the expense of fuels.   

 

Supply   

Supply of shipping in our market is driven primarily by two factors:   

  1. The total fleet of chemical tankers is fixed in the short term, and it currently takes two to three years from a new vessel being ordered to its delivery by the yard. Fleet growth is expected to be moderate in the coming years as increased recycling of the aging fleet will compensate for the orderbook growth seen in 2024  
  2. The second factor driving supply is swing tonnage, which can vary month by month. These are product tankers that normally operate in the CPP trades, as they are tailored to lift large batches of one product, such as gasoline or diesel. If their earnings drop, they can “swing” into our market to partially fill their tanks with easy chemicals, yielding higher freight rates per ton. While the second half of 2024 saw higher swing tonnage than the two previous years, it is still a way off from the highs seen in 2021 


Demand drivers:  

  • Improved macroeconomic outlook could support downstream demand  
  • New, low-cost production capacity maximizing chemical output instead of fuels  
  • Massive chemical production hubs outcompeting near-shore, higher-cost production  
  • Supply chain and trading inefficiencies increasing distance from producer to market  


Supply drivers:  

  • Balance between the aging fleet and the orderbook of new vessels  
  • Low to moderate swing tonnage from product tankers  
  • Sanctions limiting efficiency of dark fleet, supporting demand for compliant tankers  
  • The fleet speed ceiling gradually lowered to comply with emissions regulations  

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