Mixed results for global independent storage
Business trends in independent oil storage have diverged geographically, with profits led by terminals serving the long-distance trade in refined products
Trends in the oil market recently have not been kind to the independent storage operators. Oil use in the US and Europe has been declining, so smaller volumes need to be moved and stored. Meanwhile, refined product prices have predominantly been in backwardation – futures prices lower than prompt – so there is little incentive for speculative storage. The first trend has cut the logistical call on independent storage capacity and the second has cut the trading call.
But the good news is that the long-distance supply of refined products is increasing, and is seen as a structural feature of the business. The new super-refineries of Asia and other advantaged refineries – such as those on the US Gulf coast, with their access to lower-cost domestic crudes – are winning new export markets, and need storage capacity to supply them.
Accordingly the Singapore area – the supply hub for Asia – and the US Gulf are the main boom regions for independent storage at present, seeing firm fees and attracting new construction. Capacity in these areas is probably being utilised at close to 100%.
The international operators expect demand for terminal facilities to continue to grow, and are planning substantial capacity additions. The Netherlands’ Vopak, the world’s largest storage operator, says it has projects under construction which will add 4.3m cubic metres (cm) of capacity by the end of 2015 – an increase over present capacity of 14.1%. Oiltanking, the second-largest operator, has additions under construction totalling 3.7m cm, an increase of 18.3%.
Vopak’s financials show evidence of recent difficulties in the storage business in Rotterdam, the Netherlands, where much business has been lost recently (see ARA article). The company reported a 3.6% fall in operating profits, excluding exceptional items, for the first nine months of 2013 compared with the same 2012 period, to €412.1m ($556.1m) – and the third-quarter result was down by 9.2%, so the difficulties appear to be continuing.
Vopak said its occupancy rate for capacity in the Netherlands overall averaged 83% in the first nine months of 2013, dropping to 82% in the third quarter.
Capacity in the firm’s Europe, Middle East and Africa division was 89% utilised in the first nine months, while Asian capacity achieved 95%. Vopak’s worldwide occupancy rate over the first nine months was 88%, down from 91% over the first nine months of the previous year, although there was a 2.3% increase in capacity.
Oiltanking is, with trading company Mabanaft, part of privately-owned Marquard & Bahls, which publishes only limited financial information. The company reported a sharp increase in net income for 2012, to €106.4m from the €70.3m of troubled 2011, although earnings are still below the figures for previous years.
Trading operations, rather than storage, were the cause of Marquard & Bahls’ problem, and the company shut down its international trading operations in Houston and Rotterdam to focus instead on physical trade. Storage throughput increased from 148.5m tonnes in 2011 to 170.7m tonnes in 2012.