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Rotterdam operators business under pressure

Independent storage operators at the Dutch port are facing a squeeze while Antwerp has seen growth in volumes

Long-term, Europe’s Amsterdam-Rotterdam-Antwerp (ARA) gateways are benefiting from structural changes in world oil flows – but 2013 saw a downturn in business conditions, particularly for the Rotterdam operators. Continuing headwinds are forecast for the coming year.

The downturn in Rotterdam storage tracks back to the EU upping the pressure against Iran’s nuclear plans in July 2012, when it banned the import and handling of Iranian oil. The move resulted in empty tanks in Rotterdam, at a time when price backwardation – futures prices lower than prompt – was trimming demand for storage capacity. The drive to re-let the empty space, in a flat market, led to downward pressures on fees.

Vopak, which dominates in Rotterdam, said the occupancy rate for its terminals in the Netherlands declined to 83% in the first nine months of 2013, from 90% in the first nine months of the previous year. With occupancy high at the company’s Amsterdam terminal, the decline indicates that the Rotterdam downturn was substantial. Capacity for gasoil is particularly affected, as well as crude. Separately, difficulties in the biofuels business continue.

The decline in flows through Rotterdam comes after years of strong expansion. According to the port authority’s statistics, the volume of crude oil and refined products handled increased by 46.9% between 2000 and 2012 – equivalent to a compound annual increase of 3.3%. Most of the growth has been in refined products, which particularly benefits the independent storage operators (see Figure 1).

But in the first nine months of 2013, the volume of crude flowing into Rotterdam declined by 7.2%, compared with the same 2012 period, dipping to 69.6m tonnes – a loss of 5.4m tonnes. There was a rise in imports of refined products, but total port volumes – imports and exports of crude and products – were down by 3.1%.

Amsterdam also saw a decline in volumes over the first nine months of 2013, of 3.8%, although the decline came after a strong increase in full-year 2012. Backwardation in gasoil prices, eliminating the incentive for speculative storage, is the explanation. Amsterdam’s specialisation, gasoline, continues fairly strong.

Table 1 and Figure 1 Rotterdam

At Antwerp, there was a remarkable 39.5% increase in total flows over the first nine months of 2013 – an increase from 23.6m tonnes to 32.2m tonnes of refined products, and also an increase in crude volumes. The return to full operations at Gunvor’s Antwerp refinery, which was shut down in the early months of 2012 following the collapse of its then-owner, Petroplus, accounts for a part of the rise.

Refining surprises

Although the increasing long-distance trade in refined products is reckoned to be a structural development, the refining business can still spring surprises on storage operators. Up to a few years ago, a huge volume of gasoline flowed from Europe to the US, benefiting particularly the storage terminals of Amsterdam – where it is blended, and where export cargoes are built-up from smaller deliveries.

But US shale oil production, which is revitalising the country’s refining business, has knocked a large hole in that trade. In the peak gasoline months – April to August – of 2013, exports of finished motor gasoline and gasoline blending components from the Netherlands to the US averaged 51,800 barrels a day (b/d), according to the US Energy Information Administration. In the same months of the previous year, the flow was twice as large at 103,900 b/d. The flow peaked in 2006 at a year-average of 133,000 b/d, and – although declining in response to the fall in US gasoline consumption – was still in excess of 100,000 b/d in 2009, but in 2012 declined to a year-average of 81,000 b/d.

Antwerp also participates in the trans-Atlantic gasoline trade, and has also seen a fall in volumes. Over the five peak months of 2013 the volume of gasoline and blending components averaged 18,800 b/d, down from 24,600 b/d in the same period of 2012. For both countries, exports are mostly blending components to the US’ Rbob specification – reformulated blendstock for oxygen blending, to which the ethanol oxygenate is added at destination.

Amsterdam gasoline

But while flows of gasoline to the US have declined, other markets have grown. Amsterdam claims to be the world’s largest gasoline port, taking cargoes from the UK and Rotterdam and elsewhere, and exporting to expanding markets such as west Africa.

Vopak, which sold its small Amsterdam Petroleumhaven terminal to the Netherlands’ FinCo in May, to focus operations on its new Westpoort terminal, says “demand for gasoline and middle distillates capacity in Amsterdam is firm, resulting in full occupancy”. An executive says “demand for storage in Rotterdam and ARA remains robust [because of] structural, regional and global supply and demand imbalances”, but he acknowledges that the trading market for crude oil and gasoil storage in Rotterdam has been “more challenging” in 2013 than in 2012.

“In response to international sanctions against Iran, Vopak had to exit certain contracts in 2012 and seek new customers for capacity in Rotterdam during a period of difficult trading conditions, which had an adverse impact on Vopak’s results,” the company said. Of other market sectors, Vopak says “storage for chemicals continues to be steady in ARA – especially for speciality chemicals – whilst storage for biofuels in Vlaardingen [Rotterdam] became more uncertain in 2013 as result of anti-dumping duties for products from Argentina and Indonesia”.

Vopak has called for better regulation of the biofuels business, to make for a more stable trading environment for the products. This in turn will allow biofuels storage to become more structural and less trade-driven.

Despite present conditions, Vopak is adding new capacity. In Rotterdam, the firm is constructing an additional 400,000 cubic metres (cm) of jet fuel capacity at Europoort and is replacing 52,000 cm of capacity at Vlaardingen with 140,000 cm of new capacity for vegetable oils and biodiesel. In April Vopak said it will expand its Vlissingen terminal, which stores LPG and chemical gases, by 36,800 cm, which is due for commissioning in fourth-quarter 2014.

The largest operator in the Amsterdam gasoline business is Oiltanking, with 1.576m cm of capacity at its Westpoort terminal. Gasoline flows into the terminal in barges from refineries in Germany and Rotterdam, and is exported to Africa, the US, South America and Canada. Volumes are “pretty stable”, an executive says – “the big players still hold big volumes, although some of the smaller players are holding a little less”.

Gasoil flows through Amsterdam in the opposite direction – coming in from the US, Russia and some cargoes from the UK, and going out in barges to Germany and elsewhere inland. Demand-driven trade continues strong, but price backwardation has caused speculative storage to dry-up and consumers are holding smaller volumes.

ARA fee indications

Independent storage fees in the Amsterdam-Rotterdam-Antwerp (ARA) area have diverged by product over the past year, with fees for gasoline and fuel oil capacity holding ground while fees for gasoil capacity have taken a hit. Rotterdam, where speculative storage is concentrated, appears to have been affected more than Amsterdam or Antwerp.

Price backwardation has been most evident in gasoil, of which huge volumes flow through the ARA ports on their way to consumers in inland Europe. When futures prices are lower than prompt, speculative storage by traders evaporates, while suppliers and consumers trim their volumes.

The outcome is substantial free capacity for middle distillates, and some fairly aggressive marketing by terminal operators. In November, according to Petroleum Economist’s soundings of storage operators and larger users, middle distillates capacity was on offer at about €2.50 ($3.40) a cubic metre (cm) a month – down from our assessment of €3.00/cm a year previously. One trader said a substantial user could probably even secure capacity at €2.00/cm, if there was flexibility over where the terminal was.

Low-flashpoint capacity is assessed as renting in the range €3.10-€3.30/cm – the same as a year previously. The gasoline trade usually involves smaller volumes than for gasoil, and maintaining the product specification is more demanding.

Fuel oil is Rotterdam’s most satisfactory product at present, with large volumes going out to Asia in VLCC tankers. Terminals which can accept VLCCs, and can load them quickly, can charge fees in the range €3.75-€4.25/cm, according to Petroleum Economist’s assessment – unchanged from last year. One terminal manager commented on the cost of handling fuel oil, with gas required for steam-heating, water from the steam needing to be drained from tanks, and the laborious processes of cleaning tanks and pigging lines.

In Antwerp, fuel oil capacity is available for under €3.25/cm, and lower fees apply outside the ARA hub.

Fees are monthly and include one fill and discharge per month.

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