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Fears and fundamentals for independent storage operators

The worldwide independent storage business is not immune to downturns in leading economies – but structural trends are expanding demand for terminal operations

AT THE world's main refining centres, independent storage has developed into more than a commodity business. Changing product specifications, new fuels and new users have expanded the market for premium services, while high refinery utilisation has brought more business because region-to-region product imbalances have increased.

The big terminal operators say their logistical operations will see them through a downturn in trading volumes, if that should result from the world's economic troubles. But, towards the end of last year, there were forecasts that storage fees would come under pressure in 2009 if volumes should decline significantly.

Healthy demand in 2008

So far, however, business generally is strong and 2008 is seen as a good year – the fourth consecutive year of high utilisation and rising fees for terminals serving the main refining centres. In response to structural trends the large operators have been adding capacity and, in some locations, new firms have entered the business.

The Netherlands' Vopak, the largest international operator of independent storage terminals, increased its capacity by 2.9% in the financial year ending in 2008, to 21.8m cubic metres (cm). Subsequent expansions and acquisitions have lifted the total to 26.6m cm and projects under construction should raise the figure to 29.2m cm by 2011.

The second-largest operator, Germany's Oiltanking, increased its capacity by 4.2% to 12.4m cm in the last financial year and has subsequently raised the figure to 14.5m cm. The company says in-progress and approved construction projects will lift the total to 16.1m cm by the end of the decade. Oiltanking says healthy demand enabled it to maintain tank occupancy consistently at 100% in 2007, although the flow of products through its tanks was down – throughput totalled 116m tonnes, compared with 126m tonnes in the previous year.

Vopak comments on positive structural trends such as the growing long-distance trade in products, the increasing number of product specifications and the deregulation of oil product markets in some countries, which is allowing producers and traders to enter the market and increasing the demand for independent storage capacity.

Reflecting these positive trends, profits are up again, and substantially. For the first three quarters of 2008, Vopak reported a group operating profit excluding exceptional items of €237.6m ($301.6m), up by 14.2% from the same period in the previous year. For full-year 2007, Vopak's net profit was up by 34.9% to €198.1m.

Oiltanking is part of Marquard & Bahls, which also owns the trading company, Mabanaft, and does not publish quarterly figures. In 2007, Marquard & Bahls reported net income of €307.4m, more than double the previous year's €151.1m – but it is not possible to separate the firm's storage earnings from trading.

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