Capital Markets Day 2019 - d3grzk40ejrt1i.cloudfront.net · • Inbound/outbound modalities • Asset base/capacities • Speed and efficiency • Customer service • Inventory targets

Capital Markets Day 2019CEO, Kristian MørchThe future for Odfjell

Agenda

• Welcome and introduction

• The future of Odfjell

2

Safety first

3

Today’s agenda

Timer Topic Representative

09:00 - 09:30 The future of Odfjell Kristian Mørch CEO Odfjell SE

09:30 – 09:55 Targeting our optimal capital structure Terje Iversen CFO Odfjell SE

09:55 - 10:05 Coffee break

10:05 - 10:35 Meeting the future with a competitive and flexible chemical tanker platform Harald Fotland COO Odfjell SE

10:35 – 11:00 Market outlook Bjørn Kristian Røed Research Odfjell SE

11:00 – 11:05 Final remarks and summary Kristian Mørch CEO Odfjell SE

11:05 – 11:30/12:00 Lunch / Mingling session with light food and drinks

4

Agenda

• Welcome and introduction

• The future of Odfjell

5

• Core business is shipping and storage of bulk liquid chemicals

• Headquarter in Bergen, with offices in 18 countries worldwide

• One of the world’s largest operator of chemical tankers

• «Supersegregators» are our core tanker assets - trading in fixed patterns

• Global network of chemical tank terminals

• Listed on Oslo Stock Exchange since 1986

Odfjell SE

More than 100 years of experience

6

Key figures

Odfjell Group financials (2018)• Gross revenue USD 851 million• EBITDA USD 135 million• Operating result (EBIT) USD -76 million

Employees and offices• 2,530 employees globally (1,663 seafarers, 490 terminal employees, 377 on shore)• 16 offices and 7 tank terminals

Safety• Two serious incidents in 2018. fatality on Bow Sun and bunker spill on Bow Jubail)• Tankers LTIF 2018: 0.40 (2018 target: 0.7)• Terminals LTIF 2018: 0.19 (2018 target: 0.3)

Odfjell Tankers• Number of vessels: 79 (dwt 2.5 million)• Volume shipped: 15 million tonnes per year• 4 595 399 nautical miles sailed by Odfjell fleet in 2018 = 212 times around equator

Odfjell Terminals• Total tank capacity: 2.0 million cubic meters (incl. 550k cbm related party)• Located in Asia, Europe and United States• Ownership and governance setup in process of being changed

7

Our EBITDA performance has improved despite more challenging markets –there is a significant upside when markets improve

EBITDA per division, USD million: Odfjell Tankers EBITDA for every USD1,000/day change in rates:

242191

73 59 61 6698 97

147188

125 109

74

95

109110 96

27

22

40

47

3824

2010 201320092007 2008

169

2011 2012 2014 20162015 2017 2018

316

286

182157

93

11796

191

238

166

135

Chemical tankersLPG/Ethylene Tank terminals*

136163

190217

244271

298325

352379

406433

+7000+1000 +8000+2000 +4000+3000 +5000 +6000 +9000+10000+11000+12000

+27

2008-2018 Average

Source: Odfjell* 2017 and 2018 EBITDA reduced by USD 8 mill and USD 10 mill, respectively due to sale of Oman and Singapore

8

Our EBITDA performance has improved despite more challenging markets –there is a significant upside when markets improve

EBITDA per division adjusted for project Felix, USD million: Odfjell Tankers EBITDA for every USD1,000/day change in rates:

242

191

73 59 61 6698 97

147188

125 109

74

95

109110 96

27

22

40

47

3824

201220082007 2009 2014

117

2010 2011 20152013 2016

135

2017 2018

316

286

182169

157

93 96

191

238

166

LPG/Ethylene Tank terminals* Chemical tankers

136163

190217

244271

298325

352379

406433

+4000+1000 +2000 +9000+3000 +7000+5000 +6000 +8000 +10000+11000+12000

+27

2008-2018 Average

Source: Odfjell* 2017 and 2018 EBITDA reduced by USD 8 mill and USD 10 mill, respectively due to sale of Oman and Singapore

351300

182 168 170 175207 206

147188

125 109

74

95

109110 96

2722

40

47

3824

201420102007 20112008 2009 20132012 2015 2016 2017

226

2018

205

425395

291 278 266

202 191

238

166135

9

Source: Clarksons Platou, Odfjell

110115120125130135140145150155160165170175180185190195Ja

n-09

Jan-

07

Jan-

08

Jan-

04Ja

n-05

Jan-

06

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

Jan-

16

Jan-

17

Jan-

18

Jan-

19

• Ordered six newbuildings at Hudong Shipyard• Delivery between July 2019 and September 2020• Values for similar vessel are up 15% since our orders

• Two newbuildings concluded on long-term Timecharter• Vessels were delivered in October 2018 and January 2019• Replacing chartered vessels at 20% lower charter-in rate

• Two newbuildings concluded on long-term Bareboat• Delivery in December 2019 and July 2020• Replacing chartered vessel at 20% lower rate and growth

• Acquired 5 vessels and formed a pool with 5 CTG vessels • All vessels have been delivered and are now operated by Odfjell• Purchase options on CTG vessels and receive profit splits

• 4 vessels on long-term BB and formed a pool with 4 SC vessels• Purchase options and profit splits on SC vessels• BB rates secured 30% below comparable charters in our fleet

1

2

3

4

5 Sinochem transaction

Newbuildings

Investment timing secures attractive returns also in weak markets

Our recent tonnage renewal and growth initiatives (28 vessels) are concluded at what looks like an attractive point on the asset curve

Clarksons newbuilding index Timeline

Long-term TC

Long-term BB

CTGT transaction

10

We believe the markets passed the bottom in 2018 and that the fundamentals for chemical tankers and storage are healthy

11

Dem

and

Supp

ly

• Continued healthy GDP growth, but some uncertainty going forwardGDP growth

• Significant increase in production in US and ME with access to cheap feedstock – adding long haul transportation demand

• Continued high demand growth in Asia driving tonne-mileStructural shift

• IMO 2020 to drive demand for transportation of refined oil products (especially bunker trade)IMO 2020

• Very limited orders in core segment (last stainless steel order was in July 2018)

• Chemical tanker ~7% orderbook which is ~2% fleet growth p.a.Orderbook

• Strong CPP and vegoil market• Swing tonnage reverting to their core marketSwing tonnage

• Increased scrapping (all things equal)• Slow steaming and retrofitting to positively impact supplyIMO 2020

+4%p.a. + tonne-mile effect

+2%p.a. +/- Swing tonnage

12

Historically about 50-60% contract coverage – with recent increase in spot rates we have reduced our share of contracts

Spot rate, USD per ton Contract coverage, percentage of total volume

48%55% 57%

60% 61%58%

61% 60% 59%

50% 50%

1Q-174Q-16 2Q-17 1Q-18 2Q-18 Future coverage

3Q-17 4Q-17 3Q-18 4Q-18 1Q-19

-1.7%

-6.8%

COA coverage Average

2Q-181Q-17 4Q-174Q-16 1Q-192Q-17 3Q-17 1Q-18 3Q-18 4Q-18

+15% +17%

CoA rate Spot rate

28

24

20

16

12

8

4

00 10 20 30 40 50 60 70 80 90

Greathorse

Ace Navig8

Average fleet age, Years

Odfjell

MOL

Fairfield/Iino

Bahri

Stolt

Womar

Sinochem

MTMM

Hansa

Chembulk

Core deep sea fleet (Current operated fleet), # of vessels

Ultratank

IMC/Aurora

Team

Zodiac

Sabic

Wilmar

Bryggen

The current global core deep sea market is dominated by a few players, but we still face competition from a wide range of competitors

13

Size: Fleet size, DWT

Operated fleet, as of January 31st 2019

Source: Odfjell Fleet Overview

We have a network of 7 terminals with a mix of mature and growth terminals

1. All USD figures represents Odfjell SE’s ownership share and is based on FY 2018, 25% ownership share at NNOT included2. Total EBITDA excludes global management fee allocation being booked at Odfjell Terminals BV (Holding company)

Antwerp(NNOT)

Houston(OTH)

Charleston(OTC)

Ulsan(OTK)

Dalian(OTD)

Jiangyin(OTJ)

Tianjin(ONTT)

Peru, Argentina, Brazil

Global

Storage capacityIn k CBM 348 380 79 314 120 100 138 553 2,032

Start-upYear Non-operated 1983 2013 2002 1998 2007 2016 Related party -

Revenues1

USD mill 11 40 6 5 4 2 1 - 69

EBITDA1

USD mill 5 17 2 2 3 1 0 - 322

Odfjell SE ownership(%)

25.0% 51.0% 51.0% 25.5% 25.5% 28.1% 25.0% n.a.

Europe US AsiaSouth

America

14

15

Terminals - focus areas for the next years

• Complete Lindsay Goldbergs exit, and restructuring of our terminal governance setup

• Focus on terminals with synergies with Chemical Tankers

• Optimise and grow current footprint

• Grow outside current footprint

Strategic priorities Focus areas next 3 years

1 Reorganize our terminal setup with HQ integrated in Bergen, with 3 separate regions (US, Europe and Asia)

2 Focus on “Better solutions” with supply chain integration together with Odfjell Tankers

3 Improve and Optimize Houston

4 Growth within Houston footprint (3 available areas within current footprint that can be developed)

5 Growing outside current footprint is 2nd priority

A key focus is to improve synergies between Odfjell Tankers and Odfjell Terminals – helping to de-bottleneck our customers’ supply chains

Chemicalproduction sites

Storageterminals

Seabornetransport

Storageterminals

Distribution to end-user or internal further processing

Resourceretrieval

Base petroch. refineries

Manufacturing

Specializedchemicalplants

Bulk plant/wholesalers

DomesticdistributionExport

• Production rates• Shutdown calendar• Packaging capacities• Production constraints• Campaigning constraints

Rail/truck/pipe/barge

• Available routes• Lead times [days]• Incoterms• Lot sizes

• Available routes• Voyage durations [days]• Regularity/predictability• Spot/CoA and freight rates• Lot sizes

• Storage location(s)• Inbound/outbound modalities• Asset base/capacities• Speed and efficiency• Customer service• Inventory targets• Inventory max/min• Inventory class max

• Customer demand• Discretionary demand• Customer approvals• Substitutions

• Safety stocks• Production schedule• Production capacity

Supply chain for US exporter of chemicals (illustrative)

Chemical supply chain challenges: Supply chain complexity is growing Cost efficiency increasingly important Pressure to improve asset productivity Growing US & MEG production creates price pressure for Asia and Europe producers Increased seaborne trade versus domestic production creates logistics bottlenecks

Odfjell improvements will be through: Improve operational efficiencies for Odfjell and our customers Improve predictability for Odfjell and our customers’ services Reduce berth congestion at Odfjell Terminals Reduce port time and uncertainty for Odfjell Tankers Improve customers and own competitiveness in a commoditized market

16

• We will meet IMO 2020 by using LSFO

• Current price indications around USD 49¹ above HFO prices

• Bunker adjustment clauses in our contracts to reflect new fuel

IMO 2020 less than 6 months away. We do not believe in scrubbers, so we are focusing on compliant fuel and reducing consumption…

17

LNG

Scrubber

LSFO

• Retrofit not economically attractive

• LNG could be attractive for our newbuildings

• Access to LNG is a concern and creates uncertainty before 2020

• Installing scrubbers on all vessels is time consuming and not economically attractive

• Scrubbers are not sustainable in the long-term

• Majority of competitors are not installing scrubbers

1. The LSFO price is a Platts estimation as the product is not sold/bought ont the market yet.

Scrubber picture

18

…but we will be well positioned through significantly more economic fleet, and we work towards adjusting our BAC’s to cover compliant fuel

1. Adjusting for older vessels expected to be redelivered/scrapped next 3 years and 6 x Hudong in addition to 3 x larger BB/TC to be delivered

Efficiency measures Total bunker consumption per ‘000 DWT

286

222 218

251230

214193 186 182 183 177

0

50

100

150

200

250

300

201720112010 2012 20142013 20162015 2018 2019Future1

-36%

-3%

Process and routines

Retrofitting

Newbuilds

• Weather routing with annual savings of 2,000 tonnes fuel

• Propeller polishing and hull cleaning with savings of 2.5 tonnes/day

• Anti-fouling program reduce need for hull cleaning• Reversed Osmosis with savings of 1 ton fuel/day on

boilers • Propulsion System with savings of 20,000 tonnes fuel

• Concluded 31 newbuilds to the fleet• Newbuilds with a significant fuel advantage

19

We continue to work on alternative fuels and energy solutions which includes a Fuel Cell Project – initially as auxillary engines

35 % fuel

45 % CO2 emissions

90 % SOx emissions

80 % NOx emissions

• Zero emissions in port, significant emission reductions at sea

• Patented solution currently under development

• Odfjell represented in the project as the only ship owner

• The fuel cell will be piloted on an Odfjell ship within next two years

Features and mechanisms Estimated emission reductions

Sustainability is high on the agenda

20.419.0 18.2 18.1 18.0 17.9 17.4 17.5

16.4 16.6

1416182022

2015 2016201320122009 2010 2011 2014 2017 2018

EEOI trend for the Odfjell Fleet*Gram CO2 per tonne cargo transported 1 nautical mile

Environment Safety

Health Local communities

Anti-corruption

Operational excellence• Continue improvement programs in Odfjell Tankers• Focus on synergies between Tanker and Terminal

Terminals – Back to operations and profit• Complete the restructuring and develop our tank terminal division• Grow our Houston terminal

Financial strength• Maintain our strong balance sheet• Be able to act if attractive opportunity arises

Capital Allocation• Investments: Look at growth opportunities in Houston• Dividends: Target attractive dividends (market dependent)• Deleverage: Reduce our debt levels (market dependent)

Tankers: From growth and renewal to quality of service to customers• We have one of the most energy efficient and competitive fleets in the world and a solid

business intelligence system – now this has to be converted to world class services

21

Our current strategic priorities

Zero incidentsSafety performance

Target an operated fleet of about 100 vessels, to benefit from scale advantagesTankers scale

Average revenue growth of 10% per year (over time)Revenue / Top-line

Industry leading EBITDA marginProfitability

22

Delivering safely, on time, on spec and being competitively pricedCustomer service

Our long-term ambition level and targets remain unchanged

Capital Markets Day 2019CFO, Terje IversenTargeting our optimal capital structure

Our finance strategy

24

Efficient capital structure

Access to attractive capital resources

Manage risk

Accomodate operational strategy

Secure growth and flexibility

Attractive returns to shareholders

• A capital structure that provides operational and financial flexibility at attractive cost of capital

• A diversified portfolio of capital sources and counterparties to secure flexibility and a competitive cost of capital

• The financial strategy needs to manage the impact of operational and financial risks related to our business throughout cycles

• To be financially capable to accomodate our operational strategy

• We need to have the financial capability to grow and be able to act quickly as opportunities arise

• Ensure to return surplus liquidity to shareholders throughout the cycle

Source: Odfjell

25




Accomodate operational strategy

Manage riskAttractive returns to shareholders

An efficient capital structure is a key to succeed with our financial strategy

26

15 000

0

5 000

10 000

20182012

-32%

0

50

100

20182012

-25%

20

-10

100

30

-13%

2012

9%

2018

Targeting an efficient capital

structure

21.0 19.2 18.2 17.5 17.0 15.9 16.5 15.8 15.6 15.6 15.4

0

20

40

201820152009 20142010 20122011 2013 2016 2017 2019

-26%

Achieving an optimal capital structure to ensure strong cash flows in any market a priority after achieved operational competitiveness in recent years

32% reduction in operating expenses

25% reduction in G&A

26% reduction in average daily fuel consumption

Terminals back to profit

Source: Odfjell

27

02468

10121416

19951987 20001990 2005 2010 2015 2018

Odfjell NIBD/EBITDA Chemical producers NIBD/EBITDA

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1985 1990 1995 2000 2005 2010 2015 2020

Odfjell SE P/BV Chemical producers P/BV

Returns trends alongside tankers... But with lower high’s, higher low’s and higher average’s...

...And we generate higher high’s, lower low’s and similar average’s as the industry...

...But the extended downcycle has disconnected our leverage profile from the industry...

...Alongside a substantial increase in our cost of equity...

Odfjell Tankers 1987-2008 Average:3.5xOdfjell Tankers 2009-2018 Average: 9.1x

Odfjell SE 1987-2008 Average:1.5xOdfjell SE 2009-2018: Average: 0.5x

*Odfjell Tankers ROIC adjusted for savings related to Project Felix also pre-2015

-10

0

10

20

30

-10%

21%

Crude & Product TankersOdfjell Tankers

9%18%

5%1%

High Low Average

-10

0

10

20

Odfjell Tankers Crude & Product Tankers

11%

18%

1%7%

9% 9%

High Low Average

Odfjell Tankers NIBD/EBITDA vs Chemical producers

We are exposed to cyclical downturns with returns in line with the industry, but the downturn has disconnected our leverage from historical levels

1987-2018: Odfjell Tankers ROIC vs Chemical producer peer group1987-2018: Odfjell Tankers ROIC vs Tanker peer group

Odfjell P/BV vs Chemical producers

10 years of weak markets has increased our loan-to-values and we target to reduce leverage going forward

28

36%

50% 49%

56% 55%

45%

50%

56%59%

62% 63%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

20102008 2009 2011 20152012

55%-60%

2013 2014 2016 2017 2018 Target

LTV considerations

• Underlying market and pressure on 2nd hand values

• Changes in funding sources and access to attractively priced sale-leaseback financing

• However, we target lower LTVs going forward with a refocus on lower total cost of funding (and break-even)

• Retain leverage capacity for cyclical downturns and investment opportunities

Odfjell tankers : Historical loan-to-value

Source: Odfjell, External broker values from 2016 and onwards, NPV for impairment testing 2008-2015

Odfjell continues to get strong support from close relationship banks – but debt markets have changed and we have to adapt to remain competitive

29

Banks • Traditional shipping banks have reduced their exposure or exited the shipping space…• … and Far East and Asian banks are moving up the league tables

Age restricitons • Banks reluctant to offer attractive financing for older tonnage. Max. 20 year “target” for several lenders due to internal bank policies

Max. 20-25 years profileSubstantial scrap value buffer retained in the

groupAverage age of ODF fleet: 13yrs

Pressure on margins on older tonnage

• Lenders demands higher margins on older tonnage in order to compensate for higher capital ratio on “mature” vessels

Odfjell impact• Steeper amortization profiles impacting our cash break-even as we repay loans over a

shorter period of time and/or are pushed into the more expensive sale-leaseback markets

~25 bps margin “premium” for longer profiles

2019 “finance cost” per day:Mortgaged loans: ~USD 12,900

Finance lease existing vessels: ~USD 14,400 Finance lease new vessels ~ USD 13,425

ODF IBD in 2009:Bank loans: 60%

Finance lease: 20%Bonds: 20%

ODF IBD in 2019:Bank loans: 38%

Finance lease: 39%Bonds: 23%

Source: Odfjell

Our long-term target is to reach a cash break-even level between USD 18,000/day and USD 19,500/day

30

26,524

23,883

26,315 25,86427,279

25,37026,099

23,137 22,85123,657

22,222

20132008 2009 201420112010 2012 2015 2016 2017 2018 Target

18,000/19.500

LTV considerations

• We target to lower our cash break-evento USD18,000 – USD19,500 per day

• This positions us to generate positive cash flow in every cycle

• This is to ensure we can deliver on ourfinancial strategy

• Timing to succesfuly reach these levelsare market dependent

• We believe this will lower our cost ofcapital and improve ourcompetitiveness in the future

Odfjell tankers : Historical break-even

We are therefore targeting a future debt structure that ensures strong cash flow generation in every chemical tanker cycle…

31

Description Today, USD mill

• Secured and amortized debt

• Non-amortising debt

Source: Odfjell

• Average amortization profile

• Unencumbered assets, including undrawn revolvers

• Total debt

Target range, USD mill USD/day effect:

Reduction:USD 850-1,600/day

Reduction:USD 0-250/day

Reduction:USD 2,200/day

Reduction:USD 200/day

Reduction:USD 3,250-4,250/day

860 500

650

263200

250

5.7 years 8.0 years

25 75

1,100750

900

…and our target is to have access to the equity capital markets as lowering our cost of equity is a key to lower our overall cost of capital

32

Funding sources Equity

Source: Odfjell, Bloomberg, Steem 1960, * Valuation only accounts for Odfjell Tankers on-balance sheet vessels and their associated debt (i.e. no corporate or JV factors included)

Odfjell Tankers external fleet valuation Dec-18 (USD mill) (excludes TC/BB vessels)

Market value fleet 1,346

Equity instalments NB 54

Excess market value NB 79

Total 1,478

Odfjell Tankers vessel debt 878

Net fleet value 6002.3%

3.9%

6.3%

2.5%

4.4%

6.0%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%6.0%6.5%

Margin

Mortgage funding Sale/lease back Bonds Equity ?

jun-18 jun-19

Odfjell Terminals Book value of equity Mar-19

Odfjell Terminals equity value (Mar-19) 158

Target B/E range

Our long-term break-even target range translates into sustainable cash flow generation across all cycles

33

27

55

82

109

136

164

191

218

245

273

300

327

0

50

100

150

200

250

300

350

21,00019,00018,000

USD mill

24,00020,000 22,000 23,000 25,000 26,000 27,000 28,000 29,000 30,000

0

* Reflecting 2021 fleet composition (fully invested) and cash flow generated after all expenses paid (TCE evenues less opex, G&A, interest cost and 2021 amortisation schedule). Cash flow is based on how the fleet and capital structure would look like in 2021 as of today, and is therefore subject for change

TCE rate per day (USD)

All-time low(2018)

Odfjell Tankers : Cash flow in various rate scenarios and cycles

Target B/E range

These break-even levels will position us to distribute dividends to shareholders across the cycle…

34

816

2533

4149

5765

7482

9098

1427

4155

6882

95109

123136

150164

0

20

40

60

80

100

120

140

160

180

USD

mill

22,00021,00018,000 19,000 20,000 23,000 25,00024,000 26,000 27,000 28,000 29,000 30,000

* Based on a break-even of USD18,000/day. Reflecting 2021 fleet composition (fully invested) and cash flow generated after all expenses paid (TCE evenues less opex, G&A, interest cost and 2021 amortisation schedule). Cash flow is based on how the fleet and capital structure would look like in 2021 as of today, and is therefore subject for change. Market cap based on closing price 28 May 2019 (NOK28.2) and USD/NOK8.73

Low cycle Mid cycle High cycle


30% pay-out50% pay-out

3% - 5%

6% - 11%

10% - 16%

13% - 21%

16% - 27%

19% - 32%

23% - 38%

26% - 43%

29% - 48%

32% - 54%

35% - 59%39% - 64%

Dividend yield range (low-high)

Odfjell Tankers : No dividend policy determined by Odfjell, but the below show dividend potential in various rate and pay-out scenarios across cycles

Target B/E range

…and at the same time generate sufficient cash for investments, debt balloons, extraordinary dividends and deleveraging if needed…

35

1938

5776

95114

134153

172191

210229

1427

4155

6882

95109

123136

150164

020406080

100120140160180200220240

18,000

USD

mill

24,00019,000 20,000 22,00021,000 23,000 25,000 26,000 27,000 28,000 29,000 30,000

* Based on a break-even of USD18,000/day. Reflecting 2021 fleet composition (fully invested) and cash flow generated after all expenses paid (TCE evenues less opex, G&A, interest cost and 2021 amortisation schedule). Cash flow is based on how the fleet and capital structure would look like in 2021 as of today, and is therefore subject for change.

Low cycle Mid cycle High cycle


30% pay-out50% pay-out

Odfjell Tankers : Excess cash potential in various rate and pay-out scenarios across cycles

36




Accomodate operational strategy Manage risk

Attractive returns to shareholders

An efficient capital structure is a key to succeed with our financial strategy

Capital Markets Day 2019COO, Harald FotlandMeeting the future with a competitive and flexible chemical tanker platform

38

Training

• Revised training program with enhanced focus on development of core competencies

• Three step leadership training program for senior officers

• Well integrated concept for onboard training and familiarization

Data/systems

• On-line monitoring of key vessel parameters

• Digitalized systems for cargo stowage, cleaning and condition monitoring

• Systematic monitoring of consumption, port performance, predictability, and reliability

Culture/routines

• A unique safety quality system, developed and improved over decades

• Top tier retention rate for officers and crew

• Frequently consulted by class, maritime authorities, port authorities and manufacturers on issues related to transportation of liquid chemicals

• Open and honest dialogue promoted through a no blame culture

• Focus on safety programmes and campaigns, accompanied and followed-up by frequent onboard visits by responsible Superintendents and Senior Management

We have a zero incident ambition

Our commercial and operational platform is second to none in the industry

Port Captains (Houston, Singapore, Dubai and Santos)• Four Port Captains with strategic location, enabling trade specific guidance • All with sea service time from our super segregators, as Captain or Chief Officer

Technical and Marine Superintendents• Seventeen Superintendents at Head Office, coordinating daily activities with vessels• 11 of 17 have sea service time from our super segregators. Captain/Chief Officer – Chief Engineer/2nd Engineer

Marine Support Group• Five dedicated cargo handling advisors at Head Office, offering support on board and within shore organization• All with sea service time from our super segregators, as Captain or Chief Officer

Vessel operators• 21 operators at Head office• 8 of 21 vessel operators at Head Office have sea service time from our super segregators, as Captain or Chief Officer

39

IMO 2020 SummaryCompetitiveness Digitalization

86%91%

95%96%

100%95%

87%95%

100%100%100%100%

96%100%100%100%100%

91%96%96%

Bow Sun

Bow Clipper

Bow SummerBow Star

Bow SpringBow Sky

Bow SiriusBow Sea

Bow SagaBow Jubail

Bow Fortune

Bow Cardinal

Bow FlowerBow FloraBow FirdaBow Faith

Bow Fagus

Bow ChainBow CedarBow Cecil

40

At least 24 of 26 crew members have served on

board same class before

96% of all officers have served on

board same class before

At least 12 of 26 crew members have served on

board same vessel before

Class familiarity Specific vessel familiarity

Our crews have unique familiarity with our super-segregators

92%

50%50%

55%48%

54%50%

30%41%

33%54%

42%52%

48%50%

42%33%

59%57%57%

33%

Bow Saga

Bow Firda

Bow Sun

Bow Sirius

Bow SummerBow Star

Bow Clipper

Bow SpringBow Sky

Bow Flower

Bow Sea

Bow Jubail

Bow Cardinal

Bow Fortune

Bow Flora

Bow Cedar

Bow FaithBow Fagus

Bow Chain

Bow Cecil

34%


6.6

5.14.7 4.6

3.74.0 4.0

0

1

2

3

4

5

6

7

2013 2014 2015 2016 2017 2018 2019

Rigorous focus on safety has led to continuous improvement in fleet performance• Extensive training program• Stringent assessment prior to promotions• Company-wide knowledge sharing of “lessons learned”• Improved vessel monitoring system

CDI & SIRE inspections• All ships under Odfjell management participate in both the Chemical

Distribution Institute and Ship Inspection Report Program inspection regime

• The scores are assessment of compliance at the time of the inspection

Fleet performance is continuously improving for Odfjell vessels

41

Fleet performance all Odfjell vessels, Average number of observations CDI & SIRE


42

2222

22 2222 25

2935

2013 2014 2015 2016 2019 20202017 2018

Super-segregators Large Stainless Steel Medium Stainless steel Coated Regional

* Fleet as of year-end. 2019 and 2020 fleet assumes renewals of all our current short-term TC

Comments:• Adapting to the evolution of the super-segregator trade

• Stronger margins through higher share ofspeciality chemicals shipped

• Size matters – We are able to satisfycustomer needs globally

• Improved flexibility through more cargo space and tanks

• Increased exposure to strong demand for deep-sea shipments

Comments:

2004-20101993-2004 2010->

46-52 tanks

40-44 tanks

30-40 tanks

Maturity of super-segregator trade by no of tanks

We are growing our super-segregator fleet which adapts our fleet to the evolution of the super-segregator trade

Odfjell Tankers: Fleet development by vessel type


43

Gross market TCE rates: USD per day

Gro

ss p

rofit

Odf

jell:

USD

per

day

Pool (excl. profit sharing) Alternative (TC)Pool (incl. profit sharing)

Average age of TC/BB redeliveries of 13 years

Reduced downside for Odfjell

Reduced upside for Odfjell

Pool significantly reduces downside vs external vessels on normal TC and only some upside is capped in very favorable market conditions

TC/BB redeliveries in 2017-2019: Pool set up explained:

02468

1012141618202224

Bow

Ara

tu

Age

Cels

ius

Mex

ico

Bow

Mek

ka

Bow

Her

on

Cels

ius

Mon

aco

Bow

Sag

ami

Bow

Kis

o

Cels

ius

Man

hatta

n

Cels

ius

May

fair

Cels

ius

Mia

mi

Gio

n Tr

ader

Sout

hern

Jag

uar

Sout

hern

Ibis

Hor

in T

rade

r

Kris

tin K

nuts

en

Stel

lar W

iste

ria

Cels

ius

Mum

bai

Bow

Fuj

i

Bow

Riy

ad

Bow

Que

rida

Bow

Asi

a

Bow

Sin

gapo

re

Average

We have redelivered older inefficient vessels on charter of which some have been replaced by efficient pool vessels with valuable economics for Odfjell


44

Peer 3 Peer 2

0,023

Peer 1 Odfjell Tankers

0,026

0,020

0,02424.3

22.4

20.1

15.9

1998 20082005 2016

Energy efficiency index: Odfjell vs peers J19 fuel consumption by year of construction*

• The efficiency index measures how cost effective our fleet is relative to peers. This ensures that Odfjell is a natural counterpart for chemical majors competing in a commoditized market, where Odfjell ensures that they can remain competitve

• There has been major changes in fuel consumption of basic chemical tankers the last 20 years. This creates higher barriers for older tonnage to compete withmodern tonnage. Odfjell is therefore constantly focused on improving the efficiency and performance of our fleet

*There are larger variations of fuel consumption within vessel classes

We operate one of the world’s most fuel-efficient stainless-steel tanker fleetsIMO 2020 SummaryCompetitiveness Digitalization

Bow Sea

Bow Cecil

Bow Aquarius

Bow TriumphCTG Magnesium

Bow Cardinal

Competitor 1

Competitor 10

Competitor 9

Competitor 8

Competitor 2

Competitor 1Competitor 1

Competitor 1

Compettitor 2

Competitor 3

Competitor 6

Competitor 4

Competitor 5

Competitor 1

Competitor 7

• Only two players with more than two vessels in the area, a third player with two vessels and remainder of competition has one vessel45

Port of Houston May 2019

A large and global platform ensures that we can meet our customers various demands by being flexible and able to solve their logistical needs


46

• Limited number of scrubbers installed onboard chemical tankers and our scrubber study concludes that its not an option for us today• Odfjell is therefore focused on other measurements to achieve a competitive advantage as bunker dynamics are changing

• Preparations has been ongoing since 2016• Testing of new compliant fuel has been conducted on several vessels from various suppliers• A number of suppliers in need of emptying storage tanks for HFO in 4Q and we are prepared to consume compliant fuel earlier if needed

Preparations

Competitors

• Risk Management team is established, and we will keep track on every bunker tank and reduce possibility of “pocket fuel” onboard• Continue bunker detective surveys as usual to ensure correct ROB is reported

Risk Management

• 50-60 per cent of our consumption is passed on to customers through bunker adjustment charges in contracts• 15 per cent of our consumption is MGO and this is expected to be stable into 2020• This leaves Odfjell exposed to uncertain pricing of new compliant fuel for 25 to 35 per cent of our consumption from January 2020

Fuel consumption and

exposure

• Odfjell are committed to our customers and promote transparency into how we calculate the bunker adjustment charges (BAC)• We expect increased bunker costs to reflect the new compliant fuel and increased bunker costs will be passed on to customers

Bunker Adjustment

charges

• We are preparing our fleet to consume new 0.5% compliant fuel from January 2020Odfjell’s position

• IMO 2020 regulation set result in a clamp down of HFO bunkering infrastructure due to a dramatic drop in demand for HFO at ports• We bunker 80% of our volumes in 10 ports where new compliant fuel is available. In smaller ports, MGO will be available and there are

expectations that new fuel alternatively will be shipped if there’s an available marginFuel availability

Our positioning for IMO 2020 from an operational perspectiveIMO 2020 SummaryCompetitiveness Digitalization

47

Digitalization is high on the agenda in Odfjell to make our operations and customer interaction less time-consuming

Live demonstration made at CMD venue


48

• The fleet growth within super-segregators is important to improve our scale and flexibility to meet customer demandsFleet growth

• We are confident that we are now controlling one of the world’s most efficient stainless-steel vessels that makes us highly competitive Competitiveness

• We are well prepared for IMO 2020 operationally and we consider the regulations as an opportunity to improve our competitiveness furtherIMO 2020

• Our fleet can carry “everything” and we are prepared to take advantage of improved CPP marketsSwing tonnage

Summary

• Our commercial and operational platform is second to none in the industryPlatform


Capital Markets Day 2019Research, Bjørn Kristian RøedMarket outlook

Product

Methanol

Average nautical milesSeaborne trade (MT mill.) Tonne-miles (Billions)

50

2016 2017

Vego

ilIn

orga

nic

Org

anic

27.8 27.7

2016 2017

Para-xylene/Xylenes 19.4 20.8Ethylene Glycol 12.2 14.2Styrene 8.1 8.0Benzene 6.9 7.8MTBE 6.3 6.5Ethylene Dichloride 2.9 3.2Toluene 2.9 2.9

3,984 4,1191,858 1,7884,414 4,4083,304 3,050

3,055 2,577

4,211 4,415

6,100 5,4691,926 1,690

Sulphuric Acid 12.6 14.1 2,575 2,709

Caustic Soda 10.4 11.6 4,455 4,655

Phosphoric Acid 5.1 5.4 4,926 4,815

Palm oil 40.4 48.5 3,608 3,433

Soybean Oil 10.7 10.4 6,431 6,010

Oth

er Ethanol 6.8 7.6 5,373 4,671

Molasses 5.2 5.0 3,069 2,960

Others 47.2 47.2 3,359 3,483

Total 239.1 247.8 3,857 3,795

2016 2017

Tonne-mile growth (%)

2016 2017

110.8 113.036.0 34.353.9 57.626.8 23.0

21.1 17.4

26.5 25.6

17.7 17.25.6 4.8

32.4 34.4

46.3 53.5

25.1 23.4

145.8 151.7

68.8 69.6

36.5 36.4

16.0 17.8

158.6 164.3922.3 940.5

15% 3%13% 3%-4% 16%

7% -9%-23% -5%14% 8%5% -1%6% -12%

-9% 18%

13% 16%

20% 4%-11% 1%

-4% -11%

23% -3%-1% -7%

-2% 4%

2% 2%Source: Odfjell, Drewry, ICIS, Customs data

Sunflower Oil 8.4 9.8 3,670 3,694 30.8 38.9 19% 17%

Trend2019-21

GDP (+)

GDP

GDP (-)

Mega trends Inorganics & vegoils Supply & IMO 20202018 Long-term outlook

2018

29.022.614.87.28.2

6.0

3.12.9

15.0

11.2

5.4

51.8

11.2

8.8

5.0

49.9259.4

9.0

2018

3,9661,9074,4863,250

2,9634,5334,8061,655

3,127

4,464

4,778

3,618

5,477

5,068

2,880

3,454

3,776

3,644

2018

113.034.357.623.0

17.425.617.24.8

34.4

53.5

23.4

151.7

69.6

36.4

17.8

172.2979.7

38.9

2018

1%16%6%

-4%21%

-5%

-15%-2%23%-7%

-1%13%

-2%

26%

-3%

5%

4%

-9%

2018 and was another year of strong demand within our segment

51

Vertical integration+ + +

-

US ShaleCrude vs Natural

gas

China domestic capacity

‘’War on pollution’’ + ?

EV & Mobility

Organics Inorganics & vegoils Supply & IMO 20202018 Long-term outlook

The chemical mega-trends highlighted keeps affecting our markets and will continue to do so going forward

Source: Odfjell CMD 2018

52Source: ICIS, IHS, Odfjell

Production vs consumption and surplus/deficit development in key chemical production hubs, MT millions

20

25

30

35

40

45

50

55

0

50

100

150

200

250

300

350

2014

2020

E

2017

2016

2021

E

2018

2011

2012

2019

E

2013

2015

2010

Production

Demand

Deficit

China production vs consumption

MEG production vs consumption

24

26

28

30

32

34

36

0

10

20

30

40

50

60

70

2020

E

2018

2011

2016

2017

2019

E

2021

E

2010

2012

2013

2014

2015

Production Demand Surplus

2

4

6

8

10

12

14

16

0

20

40

60

80

100

120

2019

E20

20E

2017

2016

2018

2021

E

2010

2011

2012

2013

2014

2015

USA production vs consumption

Production

Demand

Surplus


Three areas evolving as main hubs for production of liquid chemicals and therefore also main hubs for seaborne trade of chemicals

53

Source: ICIS, Drewry, Odfjell

USA 31%+8 mill Tonnes

Demand

Drivers: • Attractive feedstock• Gas based chemicals• Long-haul shipments• Chemical building block

prices under pressure?


2019-2021 export growth:

Three main areas evolving as key chemical hubs for seaborne trade - US

Source: Argus, Bloomberg, Odfjell


Comment

Comment

123456789

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

USD/

barr

el

USD/

Mnb

tu

Crude oil prices Natural gas prices

0

200

400

600

800

1,000

1,200

1,400

2019201020082009 2015201320112012 2014 201620172018

-63%US Ethylene Far East Ethylene

2020

6051

20192017 2018

66

2021

55

72

58

7769

79 80

• Higher oil price has improved competiveness for US gas based chemical producers

• Numerous talks of a 2nd ‘’investment wave’’ with higher oil prices...

• ...But macro uncertainty has limited new investments...

• ...But a new wave of investments not a question of if but when

• US based producers reaping the benfit from low cost natural gas feedstock relative to Asia...

• ...But there are risks of oversupply of Ethylene and the largest derivative, Polyethylene (PE)...

• ...And PE which comes in solid form is also impacted by Chinese tariffs...

• ...This could put further pressure on Ethylene prices in the US

Crude oil and natural gas prices

Global ethylene price development, USD/tonne Ethylene & PE capacity expansions, Mt millions

ChinaUSA

US gas based chemical producers benefitting from higher oil price – Potential oversupply in Ethylene and PE could push feedstock prices even lower

54

Source: ICIS, Customs data, Odfjell, * Includes chemicals where import/export dynamics are relevant for abovementioned import replacement, i.e. increased Benzene imports is not a part of the dataset

2013 2014 2015 2016 2017 2018

-33.5%

+32.7%

Imports Exports


• Larger investments in liquid chemical facilities has mainly replaced imports since 2015...

• Despite increased exports, the net effect has therefore been minimal...

• ...And more a negative as this has created intense supply pressure on the back-haul routes to the US...

Comment:

0

5

10

15

20

25

2017

USD/

tonn

e

2013 2014 20162015 2018

TranspacificTransatlantic

Front haul rates less back haul rates

US import/export development for relevant liquid chemicals

Increased US exports has not had a meaningful impact on chemical tankers due to replacement of imports yet…

55


Region Country Company Product Start-up Capacity (ktonnes)

Americas USA Natgasoline Methanol Aug-18 1750Americas USA Shintech EDC Mar-19 250Americas Chile Methanex Methanol Jun-19 600Americas USA Sasol Ethylene Glycol Sep-19 250Americas USA Lotte Ethylene Glycol Sep-19 700Americas USA ME Global Ethylene Glycol Sep-19 700Americas Trinidad MHTL Methanol Sep-19 900Americas USA BASF Aniline Nov-19 250Americas USA Formosa Ethylene Glycol Dec-19 750Americas USA BASF MDI Dec-19 300Americas USA Yuhuang Methanol May-20 1800Americas USA Formosa EDC Jun-20 250Total 8,300

Source: ICIS, IHS, Argus, Company data, Odfjell

…But we are now standing at the cusp of the first wave of new export oriented liquid chemical plants to commence operations in the Atlantic

56

• USA became a net exporter late 2018 and the NatGasoline first restarted in February after a longer maintenance period

• Utilsation of plants started in in 1H19 expected to accelerate utilsation in 2H 19. Sasol’s Ethylene Glycol plant started in February, but not expected to reach normal utilisation before September

• With the exception of 50% of Methanex volumes in Chile expected to be shipped to Brazil (replacing Trinidad volumes), the majority of volumes are expected to be shipped long-haul, with a mix between the Far East and Europe

Source: Odfjell

Three main regions developing as key hubs for chemical production, MT millions cumulative


Middle East 22%

+8 mill TonnesDemand

Drivers: • Attractive feedstock• Vertical integration• Crude & Gas based

chemicals• Long-haul shipments



Demand




Three main areas evolving as key chemical hubs for seaborne trade – US followed by the Middle East

57

Source: IEA, OPEC, Odfjell


90

100

110

120

130

140

150

160

170

180

190

200

210

2010 2015 2020 2025 2030 2035 2040

ChemicalsRefined productsCrude Oil

CAGR:2.5%

CAGR:0.6%

CAGR:0.5%

Gasoline:

Fast growingSlow growing

Chemicals:

Lower margin

and

but

High volume

Higher margin

and

but

Lower volume for now

A refiners dilemma as integration is more complex:

Investments in the Middle East - Its all about the demand growth to maximise and extend the lifetime of its barrels

Long-term demand forecast:

58

Source: IHS, Odfjell


• The majority of refineries east of Suez are non integrated (where demand is)

• The Middle East constructs mainly vertically integrated refineries...

• ...These are in the 1st quartile when it comes to net cash margins ...

• ...While non integrated refineries are mainly in the 4th quartile

Comment

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

Net

cas

h m

argi

n,US

D/ba

rrel

of c

rude

Fully integrated Ethylene IntegratedNon Integrated Paraxylene Integrated

5,000 10,000 15,000 20,000 25,000 35,00030,000

1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

Vertically integrated chemical facility enhance competitiveness on top of the region having the world’s lowest feedstock cost

59

Source: IHS, Odfjell


6,000

8,000

4,000

0

2,000

10,000

Tota

l che

mic

al p

rodu

ctio

nca

paci

ty, m

tpa

Aramco/Sabic JV

Aramco/CLG/CB&I

‘’By 2030, the COTC complex is expected to be a significant contributor to Saudi Arabia’s GDP and play a

key role in helping the continued economictransformation away from Crude exports to higher-value

industrial products, further stimulating the Kingdom’seconomic diversification, as enunciated in Vision 2030’’

SABIC CEO Yousef Al-Banyan, April 2018

‘’Saudi Aramco is going beyond the quick wins and is instead prioritizing investments in groundbreaking R&D

technology. The Joint Development agreement with CB&I and CLG is a technology first which position Saudi

Aramco to maximize the value of each barrel of crude oilit produces in the near future’’

Saudi Aramco president Amin H.Nasser Jan-2018

Crude-to-Chemical plants are a game-changer in the chemical industry with materially higher chemical production capacity than older plants

Global Naphtha steam cracker capacity

60

8%17%

72%

0%10%20%30%40%50%60%70%80%90%

100%

Aramco/Sabic JVPetro RabighGlobal refinery industry

DieselOthersGasolineJet/Kerosene

Chemicals

• Saudi Arabia has through technology development initiated the process to construct the world’s largest chemical plant

• This is crude-to-chemical plants (COTC) that yields as much as 72% chemicals as the technology bypass the refinery process...

• This compares to a 8% chemical yield on average in the global refinery industry

Global Naphtha steam cracker capacity

Source: ICIS, IHS, Argus, Company data, Odfjell


Region Country Company Product Start-up CapacityMiddle East Iran Kaveh Methanol Feb-19 2300Middle East Iran Kimiya Bandar Caustic Soda Feb-19 119Middle East Saudi Arabia Aramco Benzene May-19 266Middle East Saudi Arabia Aramco Para-xylene May-19 1320Middle East India Bharat Petroleum 2-EH Jun-19 47Middle East Iran Marjan Methanol Jun-19 2300Middle East Saudi Arabia Jubail United Methanol Jun-19 650Middle East United Arab Emirates Emirates Chemical Factory Caustic Soda Jun-19 56Middle East Saudi Arabia Aramco Mixed xylenes Jul-19 865Middle East Saudi Arabia Aramco Para-xylene Jul-19 700Middle East Saudi Arabia Aramco Toluene Jul-19 500Middle East Saudi Arabia Basic Chem Ind Caustic Soda Jul-19 78Middle East India - Maharashtra Reliance Ethylene Glycol Oct-19 55Middle East Oman ORPIC Benzene Nov-19 46Middle East Iran Bushehr Methanol Apr-20 1650Middle East India Indian Oil Corp Ethylene Glycol May-20 270Middle East Oman ORPIC MTBE May-20 90Middle East Saudi Arabia Gulf Farabi PC AlkylBenzene Jun-20 120Middle East Saudi Arabia Jubail United Ethylene Glycol Jan-21 700Total 12,132

We are amid a major ramp-up in Middle Eastern supply that will accelerate in the second half and into 2020 on higher utilisations

61

• More delays and lower utilsation is expected from new plants in the Middle East compared to the US• Volumes from Iran has less significant impact on the market due to the political situation, but volumes are still absorbing tonnage

62Source: Odfjell

Three main regions developing as key hubs for chemical production, MT millions cumulative


China 16%+10 mill Tonnes

Demand

Drivers: • Demand centre• Competitive New vertically

integrated industry• New trading hub w/increased

exports

2019-2021 import growth:

Middle East 22%

+8 mill TonnesDemand

Drivers: • Attractive feedstock• Vertical integration• Crude & Gas based

chemicals• Long-haul shipments



Demand




Three main areas evolving as key chemical hubs for seaborne trade – US followed by the Middle East and China

Source: ICIS, Odfjell


9 9 9 1013 15 16

6 6 77

89

91111 11

12

13

1415

0

5

10

15

20

25

30

35

40

45

2017 2021E2015 2016 2020E2018 2019EPX BenzeneStyrene

0

1

2

3

4

5

6

7

8

9

10

11

12

Far East SE AsiaAG OthersStyrenePX Benzene

2015 2018

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

OthersAGFar East SE Asia

72% 17% 8% 3% 62% 20% 16% 2%

Market share (%)

China will increase its self-sufficiency rate of mainly three products where they are more competitive relative to its main suppliers…

China domestic production of Styrene, Benzene and PX, Mt million China imports of Styrene, Benzene and PX by source, Mt million

63

Source: ICIS, Odfjell


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Mill

ion

tonn

es c

apac

ity

Zhejiang Petrochemicals

Hengli Petrochemicals • China is more competitive than Korea/Japan/Taiwan

for PX due to:• New plants• Vertically integrated plants• Modern refineries recently completed• Lower construction costs• Lower labor costs

• Makes equally sense for China to produce PX domestically as they rely on the same feedstock as Korea/Japan/Taiwan...

• ...Therefore no need for the feedstock to be shipped to PX suppliers before cracked and shipped to China

• Two new PX plants in China is the similar size as North America, South America, Europe and Japan PX capacity combined

Comment

China’s new capacity is modern, large and mainly vertically integrated with newly constructed large refineries that secures their competitiveness…

Global Para-xylene (PX) capacity by size, Mt million

64

Source: Argus, ICIS, Odfjell


200

300

400

1,400

29 Aug 2016 29 Aug 2017 29 Aug 2018

000

tonn

es

Implied weekly China production Benzene HoustonBenzene Korea Benzene ARA

100

120

140

160

600

1,100

1,600

2,100

05 Jan 2015 05 Jul 2016 05 Jan 2018

000

tonn

es

Implied weekly China production Styrene Korea Styrene China

100

150

200

250

300

500

700

900

1,100

1,300

1,500

13 Jun 2016 13 Jun 2017 13 Jun 2018

000

tonn

es

Implied weekly China production Para-xylene Korea

0,0

1,8

0,2

1,2

0,6

1,4

1,0

0,4

0,8

1,6

2014 2015 2016 2017 2018

1,5

1,2 1,3

0,8

1,3

China SEAIndia Europe Others

3,300

3,400

3,500

3,600

3,700

3,800

3,900

1,4001,5001,6001,7001,8001,9002,0002,1002,200

2015 2016 2017 2018

Nau

tical

mile

s

Average miles des ChinaAverage miles ex Korea

2.13

1.85

1.57

1.161.26 1.221.33

1.61

2015 2016 2017 2018North East Asia des China Other sources des China

The price pressure leads to a shift in trade flow as producers look for new markets – As exemplified by Styrene, new destinations ensures miles counter lower volumes

Global Benzene prices vs China production, Mt million

This has led to price pressure for Benzene, Styrene and PX in North East Asia and disruption of to trade flows

Global Styrene prices vs China production, Mt million Korea PX prices vs China production, Mt million

Korea ships more Styrene to SEA & India, Mt million ...and combined increasing average milesOther sources replaces Korean exports, Mt million

65

Source: ICIS, Odfjell, * About 2 mtpa capacity in Europe and other Asia included in total new liquid chemical capacity


259

22

2018 chemical tanker trade 2019-2020 plant expansions

2217

11 8

100% 75% 50% 35%

Capa

city

Utili

satio

n

Nau

tical

Mile

s sc

enar

ios 10,000 10,000 10,000 10,000

8,000 8,000 8,000 8,0006,000 6,000 6,000 6,000

50%100% 75% 35%

Billi

on

Tonn

e M

iles

176

100% 50%75%

165221

35%

132 13246

99 110 88 66 77 62

2018

To

nne

Mile

s

FY 2018 Tonne miles

980

vs

x x x x

= = = =

The new organic production capacity is expected to support strong tonne-mile demand for chemical tankers in 2019 and 2020

Total chemical tanker trade vs new organic chemical plant capacity

66

67

Product Drivers DevelopmentSeaborne trade,

MT mill 2019-2021 direction

• Global GDP, emerging markets• US/China trade war• Substitution for soy and sunflower

• Strong production growth• Reduced import/export taxes• Weak domestic production in China

Soybean Oil

Sunflower Oil

4952

Palm Oil

• Global GDP, emerging markets• US/China trade war• Substitution for palm and sunflower

• Weak harvesting in South America• Replacing US soybean exports• Lower palm oil prices

• Global GDP, emerging markets • Non- GMO demand• Substitution for soy and palm

• Reduced market share to Palm• Global shortage, too high prices

Source: Odfjell


Ethanol

Sulphuricacid

Causticsoda

Phosphoricacid

• GDP, Phosphate fertilizers and metals• Stable demand growth from Agri• Volatile demand from metal industry

• Global supply shortage• New capacity due to IMO2020?• Strong demand from Chile

• GDP, pulp and paper and alumina• Paper demand rebounding?• Global shortage of capacity

• Global supply shortage• Reduced Brazil & Australia demand• Substitute for plastic waste?

• GDP growth• Fertilizer industry consume 90%• Food additive demand is stable

• Stable GDP driven demand

Seaborne trade, Bn. Tonne-miles

187167

1110

6163

109

3633

1415 47

38

1112 54

50

55 26

26

98

4535• Global Bio fuel demand

• Politically driven• Chemical feedstock

• MTBE substitute in China• EU imposed ban as bio fuel (2021)• Import taxes

2017 2018

Vegoil, inorganics and ethanol outlook

Source: Odfjell


0%5%

10%15%20%25%30%35%40%45%50%55%60%65%70%75%80%85%90%95%

100%

jan-17

jan-16

jan-18

jan-19

May-19

-1.0%

Trading chemicals Trading CPP/Crude

• 25% of coated MR’s were trading chemicals/Vegoils during the summer of2018

• Appears like incremental supply from Swing tonnage has bottomed out and reversing

• Declining rate of MR newbuilds will lower competition for vegoil cargoes normallyused for MRs maiden voyage

• MR’s would prefer to trade CPP and should CPP markets improve….

• …A sustainable reversal of swing tonnageis expected to materialise

Comment

Chemical tankers had a supply problem in recent years and further supply pressure has been felt by high share of swing tonnage

68

69

Chemical Tanker Back-haulChemical Tanker Front-haul

Europe - USA

Asia – Europe & USA

0

5,000

10,000

15,000

20,000

0

2

4

6

8

10

2014 2015 2016 2017 2018

Odfjell CPP share (%)CPP rates EUR-USA

Reverse swing-tonnage: We will opportunistically take advantage of strong CPP and Veg oil ratesKnock-on effect: Chemical tanker rates improves due to less supply pressure

0

5,000

10,000

15,000

20,000

25,000

30,000

0

1

2

3

4

5

6

2014 201720162015 2018

Vegoil rates Odfjell Palm Oil share (%)*

* 2018 growth is trade specific and not due to opportunistic trade into Palm Oil

Key CPP and Vegoil tradelanes typically corresponds with chemical back-haul routes – Stronger CPP and Vegoil rates therefore improves our flexibility


Source: Clarksons Platou, Odfjell

7,4%

17,0%

Orderbook ratio

Scrapping potential

SlowsteamingSwing tonnage

6,0%5,0%

Orderbook/trading fleetPotential fleet reduction factors

Corechemical tankers

builtbetween

1995-2000

Potential reduced

supply from swing

tonnage

Lower supplypotential if

owners reducesailing speed

Fleet growth is declining for both core and swing/other segment after several years of high fleet growth following orders placed in 2014-2015 Limited new orders the last 18 months and appears like appetite for new orders are low Orderbook ratio at 7%, which implies average supply growth of 2.4% p.a by 2021before adjusting for

- Scrapping- Removal of swing tonnage (IMO 2020)- Slowsteaming in the event of elevated bunker prices (IMO 2020)- New orders

0.7

0.0

0.1

0.2

0.5

0.4

0.3

0.6

1Q-20e

1Q-18

1Q-16

1Q-17

1Q-19

4Q-20e


DeliveriesNewbuildings

0.0

0.7

0.1

0.2

0.6

0.3

0.4

0.5

jan-2002

jan-2005

jan-2008

jan-2011

jan-2014

jan-2017

IMO 2020 is a disruptive event that could lead to reduced swing tonnage, accelerated scrapping and slowsteaming while orderbook is at multi-year lowCore chemical tanker newbuilding delivery schedule, Mill dwt

12-month rolling core chemical tanker newbuilding orders, Mill dwt

Chemical tanker orderbook of 7% before adjusting for several variable factors

70

Source: Odfjell


Most humans on the planet are in contact with products that were once transported on our vessels

71

Source: IEA, Odfjell


0

100

200

300

400

500

600

700

800

900

1,000

1,100

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Aluminium AmmoniaSteel PlasticCement GDP

90

100

110

120

130

140

150

160

170

180

190

200

210

2010 2015 2020 2025 2030 2035 2040

Chemicals Natural GasCrude OilRefined products

CAGR:2.5%

CAGR:1.8%

CAGR:0.6%

CAGR:0.5%

CAGR:4.4%

CAGR:3.7%

CAGR:2.9%

CAGR:5.5%

CAGR:2.9%

Plastic is the fastest growing bulk material – The “world is dependent on chemicals” and this supports sustainable demand growth…

Plastic has been the world’s fastest growing bulk material since 1970... ...And is forecasted to grow faster than fossil fuels used as feedstock...

72

Source: IEA, Shell, Odfjell


14.0%

5.0%

56.0%

8.0%

12.0%

Chemicals

5.0%

Transport

Power

Other industryBuildings

Other

8.0%

15.0%

40.0%

21.0%

12.0%

Power

ChemicalsOther

Buildings

4.0%

Other industry

Transport

Oil

Gas

30.0%

2030 2050

55.0%

2030

36.0%

2050

22.0%

…as a consequence, chemicals share of oil and gas demand growth to grow in the future & mirror investments now impacting the chemical tanker marketOil and Natural gas demand by sector (2017)

Chemical share of demand growth in Oil and Gas

Chemicals therefore a natural area of growth for global downstream companies

73

Source: ICIS, Drewry, Odfjell


20 %

6 %

5 %

25 %

Seaborne trade as share ofplant capacity

Share of plant capacity

ProductionPlant capacity

Seaborne trade

Trade

103

510

379

86Methanol

MTBE

Benzene

TolueneEthylene Glycol

Styrene

Ethylene DichlorideXylenes/incl Paraxylene

19 %

39 %

11 %

16 %

2016 2018

22 %

6 %

5 %

21 %

16 %

43 %

12 %

15 %

420

Seaborne trade

Trade

93

Production

564

110

Plant capacity

100% 74% 20% 17% 100% 74% 19% 16%2020->?

We rarely see investments in new plants without export opportunities – This could indicate higher share of future production being seaborne traded

Seaborne trade of top 8 organic chemicals (2016) Seaborne trade of top 8 organic chemicals (2018)

74

Source: IEA, Odfjell CMD 2018, Agilyx


Proposed solutions:

• Large chains like McDonalds, Starbucks and others replacing paper straws

• Several countries and jurisdictions banning plastic bags

• Single-use plastics banned by EU parliament by 2021

This will mainly impact chemicals in solid form as PE and PP. Limited usage of liquid chemicals in the ‘’waste chain’’. However, the potential substitutions could impact chemical tanker demand.

• Plastic products replaced by paper products…• …Caustic Soda is an important input factor to the paper

and packaging industry• Also, recycling technologies are invented where waste

is brought back to its molecular form as liquids:

Mega trend: Part of the world’s plastic production relates to “waste products” now under public scrutiny – Could bring opportunities for chemical tankers

75


• Standing at the cusp of the first wave of new liquid chemical plants ramping up exports from second half of 2019 and into first half of 2020Tonne-mile demand

• Orderbook at multi-year low and IMO 2020 might disrupt supply through reversed swing tonnage, increased scrapping and slowsteamingVessel supply

• Tonne-mile demand growth expected to surpass net fleet growth in 2019 and 2020 improving the chemical tanker market balance Long-term outlook

• Sustainable and strong demand outlook for seaborne trade of chemicalsMarket balance

+4%p.a. + tonne-mile effect

VS.

+2%p.a.

+/- Swing tonnage

Summary

76

Capital Markets Day 2019CEO, Kristian MørchFinal remarks

Final remarks

• Fleet renewal concluded at attractive time of the cycle and we are attractively positioned for the future Fleet renewal

• The optimal capital structure to ensure financial flexibility and return to stakeholders throughout chemical tanker cyclesCapital Structure

• One of most efficient and flexible stainless-steel tanker fleets in the worldCompetitiveness

• Sustainable and strong demand outlook for seaborne trade of chemicals in the short and long termMarket balance

• We are well prepared operationally and we consider this as a potential opportunity from a market perspectiveIMO 2020

78

Documents

Capital Markets Day 2019 - d3grzk40ejrt1i.cloudfront.net · • Inbound/outbound modalities • Asset base/capacities • Speed and efficiency • Customer service • Inventory targets