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GREATER SINGAPORE TANK STORAGE MARKET OUTLOOK 2018 – PART 1

As one of the most crucial tank storage hubs in the world, Singapore and nowadays the greater Singapore region play a fundamental role in global trade.

Far East and the ISC countries have experienced tremendous economic growth over the past decades, and this upward trend even has had an impulse after the global financial crisis in 2008.  Going forward, trade imbalances, regulations and newly build capacity will continue to influence opportunities in the tank terminal industry in the greater Singapore region.

REGIONAL DEMAND FOR OIL PRODUCTS REMAINS STRONG

The continuously growing economies have driven supply and demand for oil products in Asia, with the Indian and especially Chinese economy increasing their production substantially. China, India, Japan and South Korea are the region’s largest suppliers of oil products, with China more than doubling any other country’s output in 2017.

Far East and the ISC refinery output primarily consists of diesel and gasoline, accounting for 44% and 26% of the region’s total output in 2017 respectively. The productions of both products grew rapid over the past decade, more than any other main refinery output, while demand for both products in the region has increased gradually over the last decade.

Far East and the ISC has surplussus of diesel, gasoline and jet-kerosene, meaning it produces more than it consumes of these products. A higher surpluss generally leads to higher exports of a product, implying an increased demand for temporary tank storage capacity. Deficits exist for fuel oil, naphtha and LPG, meaning Far East and the ISC has to import these products from outside of the region.  Singapore’s tank terminal industry has been benefiting from this situation for a long time.

SINGAPORE ON ALERT AS NEIGHBORS’ TANK STORAGE MARKET SHARE INCREASES

Malaysia and Indonesia aim at increasing their market share both approaching Singapore’ total tank storage capacity, while Singapore stays on alert with only minor expansions.

Singapore has been the largest provider of tank capacity in the Greater Singapore area and has roughly tripled its capacity since 2005, especially during the prolonged period of contango between 2005 and 2011, which supported demand for tank capacity. Market circumstances were less favorable after 2011, but the construction of new capacity had already begun adding new storage tanks after this date.

Malaysia is expected to almost double its capacity in 2018 with 4,900,000m3, while in Singapore a total of 370,000 m3 or a mere 2% of its total capacity is being constructed as of 2018. Indonesia has no capacity that is noteworthy under construction but has plans to add more than 7 million m3 in the future. This expansion would more than double the country’s total capacity, but whether these plans will be executed is uncertain.

Singapore will therefore primarily see increased competition from Malaysian tank storage operators.

PREPARING FOR A NEW SET OF CHALLENGES

The Tank Terminal industry in the Greater Singapore area is facing some new challenges, such as new restrictions on emissions, IMO 2020’s new bunker fuel specifications and logistical developments in Asia.

Environmental regulations will  have a downforce to gasoline and diesel demand in the region, changing national imbalances and thus trade flows.  A sharp decline in fuel oil demand as of 2020 on the other hand, will increase marine gasoil demand, which will result in less temporary storage of fuel oil in Singapore and increase the demand for temporary storage of marine gasoil.

There may also be pressure on demand for marine bunkering and temporary oil products storage in Singapore when alternative cargo routes replace the Strait of Malacca. These could include new One Belt One Road trade routes and China’s two Ocean’s strategy via pipelines through Myanmar.

Click here to read Part 2 of the article “Greater Singapore Tank Storage Market Outlook 2018”.

SINGAPORE TANK TERMINAL MARKET STUDY 2018

Based on extensive market research, Insights Global – in partnership with Ener8 Limited – has produced a +75 pages report providing insights into the Tank Terminal Market in both Singapore and the greater Singapore area.

Click here to download the table of contents. 

For more information on how to purchase this report please contact info@insights-global.com

Insights from Lars – comparing ARA and Rhine freight rates over the summer.

Freight rates in both the ARA region as well as on the Rhine remained strong, supported by increasing demand and the ongoing low water levels, which are hampering intakes. Freight rates for Rhine based destinations have not only risen for Middle and Upper Rhine destinations, where loaded volumes are contracted by low water levels up pegel Kaub, but also destinations in the German Ruhr area are highely affected. The difference between ARA-routes like Cross Harbor transports, Antwerp – Amsterdam and Rhine based tranports to Duisburg or Cologne are shown below.

In common situations, freight rates per mton are increasing in line with the voyage durations. The strong demand, and therefore increasing rates, to German markets are seen in the two graphs. Besides the absolute freight rates, a graph is made for indexed freight rates. The base rates of 1st of May 2018 are used for this calculation. After a slow late-spring, with low freight rates per ton, rates started to increase from July on. This has been accelerated by decreasing water levels and increasing demand for automotive fuels in hinterland markets. Rates to the Ruhr area, which are longer voyages compared to ARA-transports and are therefore priced at higher levels, saw a steady increase during the summer season. In August, a distinction is seen between demand in ARA, which was fading, and up the Rhine, which was supported by diesel transports.

Last month, rates up the Rhine increased further. Water levels continued to stay low and the market regained support from outages at various refineries in Germany. The maintenance season is causing less local supply and an unplanned outage at the Vohburg refinery in Bavaria is limiting product supply even further. Importers are looking at alternative outlets and more product needs to be imported to handle domestic demand. This is partly done over the Rhine, where barges are still coping with loading restrictions. Imports by barge have however increased by over 60% during September compared to the summer months, as was seen in PJK’s Rhine barge flow reports. By comparison, rates to Lower Rhine destinations have more than quadrupled in the last months. The revenue per barge is somewhat lower due to less loaded volumes, but are still elevated. This is also seen in the ARA, where supply of barges is lacking due to the higher demand in Germany.   The demand for importing product in the coming weeks could remain high since end consumers still need to stock up heating oils for the winter. This has been postponed last spring due to the backwardated market structure, so stock levels in hinterland are relatively low. With inadequate local production, low availability of barges and high freight rates, keeping track of the markets is vital in order to stay up to date.

If you would like more information about our products like the Rhine flow service, barge freight rates and daily reports, contact our sales department in the Netherlands at +31 850 66 25 00 or at info@insights-global.com.

Oil derivatives market and tank storage markets

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Tank terminals play a vital role in daily oil trading by enabling break and making bulk operations and balancing short term variations in supply and demand. Oil trading companies have an interest in renting tank storage capacity as the oil derivatives market is related to physical oil markets. For ARA oil products ICE gasoil futures are one of the most important trading tools to manage risk. In the image below you can see the ICE LS Go Futures graph.

The backwardation at the beginning of the gasoil curve decreased to to +$0.00 despite far higher spot prices, while the contango in the middle decreased substantially. Trading opportunities have therefore become harder to find.

As gasoil inventories in the region are higher pressure is put on local gasoil prices, while higher crude prices make refinery input more expensive. As a result, Brent crude crack spreads are weak and this could lead to lower output of local refiners. Currently the tank storage market is in backwardation, traders have no incentive to store gasoil and will minimize inventory levels. That is why the demand for storage capacity will decrease when the market is in backwardation.

Would you like to have a weekly update about the tank storage market ? Or get a better insight about the ARA region ? Contact us for more information and become familiar with our diverse services.

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Quick insight ARA Tank Terminal capacity expansion

The ARA region is an important trading hub in Northwest Europe due to its infrastructure and fundamentals to serve the physical market for liquid trade. Location is key and ARA’s location is exceptional due to the Rhine river that connects with the Benelux countries, Switzerland, France and Germany. Also the ARA region provides refining facilities, tank storage and is seen as oil pricing center.

In the first image you can view the evolution of the tank terminal capacity in the greater ARA region. Important capacity additions in the past two years were done by Botlek Tank Terminals, Koole Tank Storage Minerals and NoordNatie Antwerp. At the same time we can observe various expansion activities in the ARA region, which will increase the current tank storage capacity further.

Secondly in the image below you can see the capacity under construction. Various players will also be adding capacity to their current storage capacity. The total amount of storage capacity under construction will be about 2.3% of current installed capacity and will be accessible in the coming years. Besides expansions , new terminals are expected to be built as well in various ports, focusing on liquid bulk like mineral oil products & petrochemicals.

We do expect some changes that might alter the ARA fuel oil market and petrochemical market and may therefor influence the tank storage market in those segments. Are you interested to get more information contact us at the headquarters in the Netherlands at +31 (0) 850 66 25 22.

A brief observation of the Northwest European markets and its place in the global naphtha supply chain.

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Tank terminals play a vital role in current global markets. Their primary function is to physically balance supply and demand along the supply chain and to facilitate opportunities. The ARA region is the main trading hub within Northwest Europe due to its outstanding infrastructure, its network with many active market players and its place within the overall supply chain. We will take a closer look at the naphtha markets in this region and its importance for the international oil markets. Naphtha is retrieved from various sources like condensate gas, petroleum distillates or the distillation of tar and is mostly used in the gasoline blending and petrochemical markets.

Within ARA, with the Port of Amsterdam being a gasoline blending hub, demand for naphtha is fairly high and it makes North West Europe net-importer for the product.Other regions like the Middle East , the Mediterranean and India are net-exporters which provide global trade flows of the product. Competition for import to North West Europe comes from petrochemical markets in East Asia, which are also big net-importers as seen in the top graph to the right. The imbalance between the supply and demand in the different regions provides trading opportunities in various ways.

The ARA naphtha import is headed by Russia, having the biggest volume compared to the other countries with UK, Germany, Algeria, France and Spain as well in the top six sources list, as seen in the graph. This shows the reliance on near as well as less local markets of the various market participants. A shrinking imbalance is negative for the ARA tank storage sector. However, considering the market size and the option to switch to the gasoline segment the impact seems small.

PJK International provides direct insight in the market by not only its annual Tank Terminal reports, but also with weekly reports on stock levels of various products (including naphtha) stored at independent tank terminals in the ARA region, a weekly report on the trade flows up and down the Rhine river and daily barge freight rates for transport within ARA and up the Rhine. This way, we provide tools for better and quicker decision making processes.

Would you like more information ?For more information contact us at Insights Global HQ in the Netherlands.+31 (0)850 662500

Insights from our analysts

This weeks insight from Lars van Wageningen, our Operations Manager at Insights Global, also quoted by Bill Lehane (Bloomberg) considers the market is getting tight. The inland stockpiles haven’t been replenished over summer because Rhine barges haven’t been able to operate at full capacity. Furthermore even as the water levels start to recover, the Rhine barge rates remain high; also barge traffic has risen on the main river. In addition the Bayernoil Vohburg refinery outage is also adding to tightness, with suppliers in that region looking further north for supply than usual.

A quick Insight in the ARA petrochemical tank storage market.

In Northwest Europe the oil and the petrochemical sectors are leading sectors that employ thousands of people directly and indirectly within the region. The main European production cluster for liquid bulk products is made up of the Benelux countries, Switzerland and the German and French regions that are connected to the Rhine river.

The Amsterdam, Rotterdam, Antwerp region or ARA is the main trade hub that connects Europe to global markets. The petrochemical sector is responsible for producing various materials such as plastics, paints, solvents, fibres and raw materials for pharmaceutical and cosmetics sector. Taking a closer look at the petrochemical side of the cluster and the different market participants in it, many of the companies produce goods in high-volume or ‘bulk’ quantities.

Companies in this cluster have been getting more exposed to severe competitive pressure. This has been Leading to the closure of for example La Mede refinery, Reichstett refinery, Petit Couronne refinery and the Wilhemshafen refinery. Also the decision made by Gunvor to not go ahead with their investment in upgrading the GPR site is a sign of high uncertainty amongst players about what the future will bring. Despite this at the same time there are others planning expansion like Ineos, one of the leading chemical companies with sales of around 60 billion dollars and their production network spans 171 sites and 24 countries. Ineos announced that their plan will have 2.7 billion capital investment in Northern Europe.

One of the things to watch in the future and the question for all is; where will the new Ineos plant be built. According to news articles both Rotterdam and Antwerp are being considered. As Ineos already has production sites in Antwerp we give Antwerp a slightly bigger chance, but you never know what the outcome will be. Either way it is likely to boost trade in ARA, as Ethane and propane imports will increase and most likely chemicals and intermediates trade will also increase.

Bertrand Chupin on The Challenges Ahead

Welcome to “GRIPPING THOUGHTS”, the space created by Insights Global where Clients, Partners and Friends are invited to share ideas and insights that help shedding light on the challenges that the Oil & Gas industry faces, in the near and long future.

So join us, read and get inspired by our interview with BERTRAND CHUPIN, VP of the Loading Systems business unit of TechnipFMC, a global leader in subsea, onshore/offshore and surface projects, with about 37,000 employees.

Q:Bertrand, how would you describe the main market challenges at the present time?

The market has drastically and irreversibly changed over the last 5 years. Terminal owners are expecting vendors to significantly reduce equipment CAPEX. In addition, with fewer investments moving forward during this period of time. Competition has been and remains highly aggressive, pushing vendors to find innovative solutions to reduce costs. Also, once the investment decision is made, clients want their projects faster demanding shorter lead times. Finally, buyers are looking for first-class service, fast availability of spare parts, fast mobilization of site engineers and lower OPEX.

Q:And how do you see it evolving in a period of 5 to 10 years? What are the trends and challenges ahead of us?

Although the market and our clients significantly reduced investments during the last five years, we have observed signs of recovery in the last few months. Deep cost reductions have enabled projects that were otherwise unprofitable without compromising safety and quality standards.

It is also likely that automation and unmanned operations will be further developed in the future to address OPEX challenges. In addition, operational and maintenance are currently being studied and implemented.

Finally, a few new market segments are coming along, specifically those linked to the usage diversification of LNG (Liquefied Natural Gas). New regulations imposing significant reductions of CO2 and NOx emissions for maritime transportation are opening new opportunities to LNG by replacing conventional HFO (Heavy Fuel Oil) and maritime diesel. New infrastructure and value chains are being developed to allow this conversion providing new applications to loading systems manufacturers.

Q:At last, how is TechnipFMC getting prepared to these challenges that the future post?

TechnipFMC has reduced costs through improved execution and standardization. Always thinking about the future, TechnipFMC’s Loading Systems division maintained the same level of investment in R&D over the last few years to provide the industry with breakthrough technologies such as a full electric loading arm that replaces the conventional hydraulically-powered one and significantly reduces OPEX to provide our clients with greener offloading solutions.

Services is also an area of focus: reducing inspection and maintenance cost by using drones is, for instance, one of the new services offered by TechnipFMC. A new strategy on spare parts management has also been implemented to provide our clients with critical spare parts in a shorter delivery time.

Finally, the recent merger opens doors to the flexible hose technology through Coflexip™. The adoption of flexible solutions is expanding within offloading applications and make TechnipFMC the sole loading systems manufacturer with the ability to provide both rigid articulated pipe and flexible hose solutions.

PS: if you want to contribute to “Gripping Thoughts” please send an email to acavalcanti@insights-global.com

Find here other “Gripping Thoughts” articles:

Read now the interview with Mr. Koen Algoet – Product Manager Terminal Solutions – and Mr. Kevin Pluvier – Project Manager Oil & Gas – at Agidens, a solutions provider in the areas of security, reliability, efficiency and sustainability.

Importance of Tank Terminals in Tanker Shipping

Businesses and traders of bulk liquid cargoes and gasses select ports because of their location, maritime access, hinterland connectivity, value-added services, economies of scale, and the availability of independent tank terminals.

Tanker owners prefer to sail to ports with high throughput volumes, fast turnarounds and low demurrage risks. The availability of tankers is a critical factor in the success of ports.

Ship Owners also look at reducing costs through vessel design, slow steaming between locations and reducing time spent in ports by optimizing loading and discharging.

The ship-shore interface involves tankers loading and discharging at regularly visited shore terminals, but with spot activity, vessels also need to call at many terminals they are not familiar with. This comes together with an increased risk for tanker owners. Similarly, each tank terminal now handles more tankers of different types and sizes than ever before.

The above indicates that the relation and coordination between vessel owners and tank terminals could be of great importance and a clear game changer. Better cooperation will not only help optimize operations and reduce cost but also support better risk management.

The importance of tank terminals in what-if scenarios

A tanker owner may need to discharge a cargo due to an emergency or because missing a loading or discharge window. In the chemical trade, for example, there is an agreed laycan or in other words an agreed loading time range at the end of which comes the time when the charterers are entitled to exercise their option and cancel the charter party for non-arrival of the owners’ vessel.

Being stuck in a port or being cancelled by the charterer has an impact on not just the current voyage, but all future voyages and fleet planning. This can have a huge negative impact on the owners’ financial performance.

So, in case of an emergency, delay or cancellation, good relations and communications between tanker owners and tank terminals may help mitigate risks. Finding a tank terminal to discharge cargoes during an accident or hazard may also be required from time to time.

New opportunities

Tank terminal projects are very good market indicators since projects are often announced early and set the stage for future product flows. Bulk liquid terminals play an important role when trading centers are shifting and new hubs are being developed.

Demand and production swings are taking place all the time resulting in shifts between long and short haul shipments. Short haul shipments tend to have smaller volumes and therefore require smaller vessels. Such changes have an impact on loading and discharge operations at tank terminals, including jetty capabilities and tank sizes.

As Owners are looking for economies of scale, ships are however getting bigger and ship owners need to make sure that tank terminals can handle such larger vessels and large quantities of cargo. A good example is the Bow Pioneer, the largest IMO II chemical tanker with a deadweight of 75000, measuring 288 meters long and 37 meters wide. The use of larger tankers in any market segment may result in the development of more hub terminals to receive larger vessels and support regional distribution and transshipment activity.

Tank terminals may also be an interesting investment opportunity for ship owners to diversify and create a more balanced business portfolio. While freight rate and volume levels may be low during an economic downturn, inventories at terminals may be high during such times. Some storage contracts are negotiated on a take or pay basis which means the client pays even if they don’t use the tank. This provides a level of guaranteed income. And if not invest, why not develop a strategic tank terminal tanker owner alliance for a specific project.