Odfjell: High Bunker Costs are a Serious Concern

The company said the supply-demand balance for chemical tankers is improving

Norwegian bulk chemical transportation and storage company Odfjell SE says high bunker costs are a "serious concern" as it reported an increased net loss for 2013 Q1 to $13 million from $4 million in the same quarter last year.

Revenue for the period fell to $291 million from $333 million last year.

The company said the chemical tanker market improved slightly during the quarter, while bunker prices were $15 per metric tonne (pmt) higher than at the end of 2012 at $655 pmt before hedging and bunkers adjustment clauses were taken into consideration.

"However, high bunker cost and increased congestions and delays in port are serious concerns, both negatively impacting our results and performance," the company said.

On the terminal side of the business, the company said its re-commissioning effort at Odfjell Terminals (Rotterdam) is moving more slowly than expected, mainly because of a shortage in engineering capacity.

The company shut down the terminal last year, which has been gradually been re-opened since then, and is working towards getting it fully operational again.

The company said lower-than-expected manufacturing growth in China, combined with slow U.S. economic growth, is keeping global development "uncertain."

"Therefore prospects for the expected boost in demand for our tanker and terminal services continue to slip," Odfjell said.

The company added that, although tank terminal results should improve in the coming quarters, it does not expect significant improvement in the chemical tanker market for the rest of 2013.

"Bunker prices and the supply/demand balance continue to develop favourably and are providing grounds for cautious optimism longer term," it said.

"However, downward pressure on freight rates towards the end of last quarter and continuing congestions and delays in port are both a growing concern and may negatively [impact] our performance."