May 1, 2020 [Author: Roderick de Rooij, Owner RDR Consultancy] – The COVID-19 crisis has a firm grip on the global economy, with the oil market in particular. On Monday 20 April the price for a barrel of oil went negative for the first time in history. Where there are losers, there are also winners….
Let me start by saying it is a misconception that storage terminals are filling their pockets during these historic times. Take Vopak for instance. 60% of their revenue comes from chemical and gas storage. That leaves 40% for petroleum products, the products which are in high demand, from a storage perspective, like jet fuel and gasoline. In their Q1 update they reported an occupancy rate of 86%. The remaining 14% empty capacity can be subdivided in petroleum products, chemicals & gasses and maintenance. Furthermore, the empty tanks should also be compatible with Jet Fuel and Gasoline.
That leaves little room to fully grab the opportunity of the market shortage.
Storage companies like Vopak, Oiltanking and VTTI, amongst others, also have a clear long-term focus rather than making a quick buck. Relationship management is key to sustain future growth and a healthy cash flow.
Terminals in the ARA (Amsterdam-Rotterdam-Antwerp) area, which are well located, will see a healthy demand for storage all year round. The volatility of the oil price does not affect them that much. It’s the less located terminals that profit from this shortage. These terminals will also be the first ones to be emptied once supply and demand are more balanced.
During the past years the independent storage operators have had a clear focus on increasing their chemical capacity. Building dedicated chemical capacity can be three times the price of petroleum capacity due to its smaller size, expensive material and product specific features. So, it has been an expensive choice.
Chemical production units are currently coming to a point whereby their product portfolio may shift. The demand for food packaging has increased as people are buying more food and storing it. On the other hand, the automotive industry is suffering a double whammy; the rise of the EV cars and the economic slow done.
For storage operators it is hard to adapt quickly to the needs for their chemical customers as it is expensive to modify chemical tanks and it takes quite long.
Nevertheless, it is not bad to be in storage now.
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