Good morning if you're joining us from Europe, and good afternoon if you're joining us from Asia. My name is Kristian Mørch. I'm the CEO of Odfjell SE, and I have the pleasure of welcoming you to this year's Capital Market Day. We had hoped to invite you again this year for a physical Capital Market Day like we did last year in Oslo, but due to the COVID-19 concerns, we have decided to live stream it here from our office in Bergen. It also means that the agenda will be a little bit more compressed than we had planned for and hoped for. We will cover quite a lot of ground during this presentation. We will, however, be having a Q&A towards the end of the presentation where your questions are more than welcome.
If there are things that you find we do not cover in great enough detail during this presentation, you are, as always, welcome to reach out to any one of us after the presentation today and get more information. I'm joined today by Terje Iversen, who's going to come on after me, CFO of Odfjell SE. I'm also joined by Bjørn Kristian Røed, Head of Investor Relations and also Head of Research in Odfjell SE. Before we start, as I said, we are more than happy to answer your questions towards the end of this presentation, and I'm told that on the top right-hand corner of your screen, there will be a button you can press on and post your questions, and then we will be taking those questions towards the end of the presentation. Thank you again for joining us, and we will dive right in.
I will start by giving you a short overview of where we are. I'm not going to spend too much time on the numbers. We have recently had the Q1 release. Today is more about strategy and operations, and Terje will, of course, cover a lot of the finances later. I will cover the strategy and the operational update and a few comments on the COVID-19 effects. Terje will then come on and talk about the finances and liquidity and balance sheets and so on. Bjørn Kristian will come on and speak about our latest market view and the fundamentals for our market. As I mentioned a few times already now, we will have the Q&A session.
If we start by looking at the key highlights for Odfjell at the moment, we allow ourselves to say that we have had a good start to the year. The first quarter this year was the best quarter we have had since 2017. The way that the second quarter now is developing, the quarter is not gone yet, but the way that it is developing, we believe that the second quarter will be stronger than the first quarter. It's been a good start to the year. Our spot markets have been slightly softer lately, but activity remains good, and we have had quite good help from the CPP markets in the first and the second quarter. Our COA rates continues to be renewed at increased rates, which is a very good sign. Our COA coverage is about 50%.
It's slightly lower than it has been historically, there's a reason for that, and I'll speak about that in a moment. Also very importantly, the portfolio itself, which means the way that the COAs interlink with each other in terms of efficiencies, is also stronger than we have had for quite a while. We continue to operate safely. We have high utilizations of the ships, we have high utilization of the terminals, and we have 100% of our capacity operational, and that has been the case throughout the pandemic. The cost-cutting that many of you know that we have been through the last couple of years and the efficiency gains is really helping us right now because it means we have a quite competitive platform and we can focus all our attention on the operations, and I'll speak about that on the next slides.
Of course, when something like the pandemic happens, it's natural that we also change our short-term focus. We have taken precautionary measures. We are doing what we can to make sure we have enough liquidity. If the bond market does not open, we have a bond that matures in the first quarter of next year. In general, we are, of course, taking a quite defensive view. We do not know what the future will be bringing. All in all, as I said, it's a good start to the year. It's also been a good test of our platform, and we believe that we have shown in the first quarter and will be showing in the second quarter that the platform we have is quite competitive and our business model is resilient.
We keep talking about the platform, and what do we mean when we talk about having a competitive platform? On slide four, we say that, of course, the COVID-19 has been a disrupting factor. Saying that we have not been impacted by COVID-19 is not true. Financially, that is absolutely the case. Operationally, of course, it has been quite a challenge. Our key concern is that we cannot move seafarers around the world. We cannot get people on and off our ships. What used to be small operational challenges are now big operational challenges, but the net effect of that has not been measurable to a significant degree for Odfjell SE. That is, I think, because of the platform that we have.
First of all, we have a truly global setup, which means that the challenges that we meet, we generally have people on the ground that can help us solve those problems, and that's a great benefit to have in these times. The second part is that we have most of our fleet is technically managed in-house, and those that are out-house is managed by one provider, which means we have very good control and very close contact with the ships. Many of our captains and officers and crew have been with Odfjell for many, many years, and it's much easier in times of crisis to communicate and execute when you have that kind of a setup. Our COA coverage is around 50%, as I mentioned earlier.
It's a little bit lower than it has been historically, but it's still high enough to give us protection from a downward market, and it's still low enough to give us the flexibility. When you suddenly see that some trades are a little bit slower in those trades, we have the flexibility to either cancel sailings or put in smaller ships or bigger ships if that's necessary. We do have some flexibility in our system, and we also have the flexibility to free up ships to participate, for instance, in the CPP markets, which we have benefited from, especially in the second quarter. On our fleet composition, we have a TC fleet. When you look at the box second from the left here, you're looking at the TC fleet.
You can see that since 2017, we have systematically been reducing our exposure to the TC market, which means we have less commitments, we have less monthly payments of TC hires. At the same time, we have been replacing that with pool ships. Now, a pool ship is not the ship where we have any downside. We don't have any fixed payments up higher to those ships, but we do get a fee for operating those ships, and we also have a share of the upside if we do well on those ships. That is not very dissimilar from the upside from a TC ship, and it gives us quite a more agile fleet base. The final part that I want to remind everybody is our ships carry every year around 600 different commodities. They are chemical tankers.
They are designed to be chemical tankers, but a lot of our ships actually trade in CPP and other commodities just as well as any other ships. In the second quarter, we have been releasing tonnage from the chemical trades that has gone into the more standard CPP and easy chem trades. All that means that we have a very competitive platform. If you look at the bottom slide, I mentioned a couple of times that we are comparing apples- to- oranges a little bit, but at least we believe that we have shown that we are consistently outperforming the market. The COVID-19, the question we do get a lot is, how does this resemble the last crisis that came in 2008 and 2009?
The honest answer to that is we do not know that yet, because we do not know what comes after the COVID-19, how deep the recession or even depression may be, or if it's going to be V shape or WW or whatever. There are a couple of key takeaways that I would like to highlight. First of all, if you look at the demand picture in 2008- 2010, I think what has surprised a lot of people or is surprising a lot of people is that demand continued to grow throughout the last crisis. It grew by a compound of 3% per year. What happened in 2009 with the financial crisis was never a demand crisis. The 2009 crisis was also a structural crisis where what we're looking at in the COVID-19 is a pandemic with voluntary shutdowns.
Of course, that leads to unemployment and probably one of the biggest dips in the world economy. From a shipping perspective, the data we're looking at, demand does not contract. That's not the picture we're seeing now. It has to go quite bad for the world economy for us to see a contraction in demand. We have lowered our demand growth forecast. We have lowered our demand forecast a little bit, but it's still a positive demand growth. The single biggest difference between 2009 and what we're seeing today is that in 2009, we came out on the back of a significant growth in supply of ships. The number of new ships coming into the market each year was around 14%, 15%.
At the moment in 2020, we are seeing a supply growth of 1.4% and next year only less than a half %. We believe there are good arguments that in 2009, what you saw was actually a supply driven crisis, not a demand driven crisis. That also means that with a very limited addition of supply at the moment, then this market is going to be fairly resilient. As I said, if there was ever a time for a disclaimer, as I've said earlier, this is probably it, because we do not know how big the impact is going to be on the world GDP. We are encouraged by IMF, who says that next year is going to grow by around 5%, but we will have to see and also prepare for an alternative where it doesn't.
The next point is a little bit about our strategy. I'm not going to spend too much time on it. Our long-term strategy stays in place. That is about efficiency for our customers, efficiency for Odfjell. It's of course about growth, it's about scale in tankers. It's about our terminal footprint start growing again, and so on. That entire strategy stays in place, but like any good strategy, you have to adapt to the terrain around you. It's only natural that due to the pandemic, that we are also changing our short-term priorities. What that has meant for us this year so far is, first and foremost, our focus has been to keep everybody safe. Safe and healthy on board the ships, on the terminals and in the office.
We have so far been blessed with no confirmed cases on board our ships or the terminals or in the office. The second priority is to keep the fleet operational, keep the terminal operational, keep delivering on our promises to our customers, keep loading the ships, keep discharging the ships, keep collecting our freights. Really, operations. The third one is to de-risk. Terje will talk much more about that. We have been accelerating some refinances. We are close to completing a refinancing that allows us to redeem our bond in the first quarter of next year if the bond markets should not open. In general, of course, take a cautionary approach, reduce CapEx where you can, reduce spending where you can. Finally, and that's an important thing, is to keep distractions to a minimum.
At the moment in Odfjell it's about operations, and operations, and in general, keeping engagement levels high. Our global organization have been working from their homes. Some of us work from our homes for nearly three months. When we look at the fact that we keep delivering to our customers and we have not had any measurable effects on our operational KPIs, then I think it's a sign that things are working well. I'm proud to say that the team has done a fantastic job. On the next slide, I'm going to talk a little bit about sustainability. This was a section that we had hoped to expand quite a lot on the Capital Market Day. This time you're only going to get one slide. I'm going to try to make that quick and it doesn't do the subject justice.
There are a couple of things I want to say. First of all, I want to say that sustainability has always been very close to the heart of Odfjell and something that we've been working systematically with. We have just not been very good at explaining to the outside world what we did. Since 2018, we have been issuing a sustainability report, and I encourage you to read it. At the moment, we are also working on a more ambitious plan with some fairly, let's say, ambitious targets for how we're going to keep improving on the ESG. We are working on a reorganization that will also ensure that ESG is anchored on all levels of the organization in Odfjell. If you just allow me to give a few highlights on what we have already done on the ESG front.
The E, of course, is environmental, and I think it's a quite confusing picture when you start trying to understand the energy efficiency of ships. There are several ways of measuring the energy design index. There are several ways of measuring the operational indexes. I think the industry has to come together and to make sure that we're all working from the same baseline. That's a little bit of a, at least from my sake, I get a little bit confused when I'm looking at that. We like to keep things simple in Odfjell, and if you measure the total fuel we have burned over the number of tons we have transported over distance, it's a fact that we've reduced our environmental footprint by 30% since 2009. That's a significant improvement in our energy efficiency.
We're also happy to see that in many of the comparisons that I've been doing on the design indexes, because of all the fleet changes we have recently done, that we are right on top of those comparisons compared to our competitors. That does not mean that we should be standing still, but it just means we have a very good starting point. Finally, I want to say that in 2021, we plan to do a test of a pilot, a fuel cell auxiliary engine on one of our ships, and that's going to be first of its kind in the industry. Hopefully, that's the path to zero emissions, to begin with at least when the ships are in port. On the social part of ESG, Odfjell does not compromise on safety.
We have a very strong safety culture, and I'm happy to say that we have not had any LTIs since August of last year. I hope I'm not jinxing anything by saying that, but we do have a good safety statistics in the company. We also have a set of corporate conduct principles which our vendors have been asked to sign up on. We have a strict gender diversity program in place. We are signed up to UN Global Compact and so on. On the governance part, we have a clear policy on anti-corruption. We have a clear integrity framework. We have a mandatory training of code of conduct. We are a member of the Anti-Corruption Network, and we also support, of course, the recommendations of the ship recyclings and so on. More will come on that. One slide does not do this justice.
We hope that in connection with our Q2, we will be able to communicate a clearer plan and our revised ambitions on the ESG front. Terminals is also a subject we wanted to expand on here. You're also only going to get one slide. I think the highlights from an investor perspective is, first of all, that the exit from Lindsay Goldberg, our previous partner in terminals, is coming to an end. They are still our partners in one Chinese terminal and the terminal in Korea. We have said that if the opportunity is there, we will tag along on the Chinese terminals and exit China with that divesting. Korea is a strategic terminal for us. Other than that, we have a very successful terminal in Antwerp, and we have our main terminal, two terminals in the U.S., one in Charleston, one in Houston.
I think the one in Houston is one we have been talking quite a lot about. It's our biggest terminal, but it's also the terminal where we're going to be focusing our growth. On the slide number eight, if you're looking at that, on the left-hand side, you're seeing a picture of the Houston terminal, and we really have three growth projects. Maybe before I just dive into those three projects, we recently announced that we have succeeded with the refinancing of the terminal. The growth in the terminal in the U.S. will be self-funded within that joint venture together with our new partners. The terminal in Houston has 380,000 cu m. We have available land bank to grow that by around 50%.
The way we go about that is, first of all, we have Bay 17, that is three tanks that are inoperational. They are existing tanks, they need some work. That work is ongoing, and we expect those tanks to be in operation, I think by the end of this year, with fairly limited CapEx. The second phase is phase II, we call Bay 13. Bay 13 is smack in the center of the terminal. It is where our old control office used to be. The control building, we have moved that and freed up land to build around 30,000 cu m- 35,000 cu m. We expect to take investment decision on that shortly. Those tanks will be able to use the existing infrastructure on the terminal. The biggest build-out on Houston is what we refer to as The Point.
If you look at the picture on the left-hand side, you can see a red circle in the bottom right-hand corner. That is really a piece of brownfield land that with waterfront access that we are looking to building out. If we build that out, we need to build the wharfs as well, so it's a bigger project than the other two. It's a project where we are really waiting for an anchor customer to sign up to make this investment happen. This is going to be around 150,000 cu m, two deep water docks. Our share of the CapEx will be around $100 million. Those are, I would say, ballpark figures until we know exactly how this is going to be built out.
As I said, we are waiting for an anchor customer to sign up before we take that step. Finally, capital allocation priorities on Odfjell Tankers. The remaining new buildings in Odfjell are fully funded. We have zero CapEx investments beyond 2020. Any growth we are looking at in Tankers will have to be capital efficient. We don't have any plans of new buildings and secondhand acquisitions at the moment. I think we have fairly good visibility on CapEx within the Tankers. On Odfjell Terminals, we keep sticking to the principle that they have to remain self-funded. We have refinanced the U.S. terminal, and they will be able to fund their own growth. It is soon time to start moving forwards on terminals because we have been selling off over the past couple of years.
Then finally, the last two points, we still have ambitions to deliver and of course return money to our shareholders via dividends. Both of those will be market dependent. So how fast we will be able to go, we don't know, but at least I think if you judge from the first two quarters of this year, even with the pandemic and the uncertainty, we have had a good start to the year. We hope that will happen soon. I think that was the end of my slides, and I'm going to hand it over to Terje, and then we will come back for the Q&A.
Thank you very much, Kristian. Good morning and good afternoon to everybody. I will start giving a recap of our finance strategy and also give some thoughts around how we think about creating an efficient capital structure and how that should impact our financial ratios. To ensure that we are able to reach our long-term financial goals for the company and also then support the long-term overall goals for the group. If I start talking about the capital structure, as I said, that is very much the key how we can succeed in reaching our financial targets.
I will also get later in the presentation, go through the various financial targets, where we are today and what we think about how we are going to reach those targets and also indicate how and when we think we can reach those targets then to complete and fulfill our strategy for the final spot. If you go into the details about the capital structure, of course, reducing debt is high on the agenda and has been that for a while. Even though we have seen that we have had increasing debt levels, the last 12 months because we have taken new builds delivered from the yard. However, we have been having a very good access to external debt in today's situation. Also I would say that we are attracting debt at attractive levels, very much stable compared to where they've been the last three years.
I will also talk about how we are optimizing the debt structure. We have been tapping into available sources, and we are focusing very much on keeping those sources available. Of course, also maintaining a flexible debt structure is important for us. Having various structure for various different assets and making sure that we are not locking in long-term expensive financing structures, but keep the necessary flexibility to manage the risk and cyclicality that we have in our business. Of course, also to lower the cost of equity, that is a remaining challenge for us. We think that when we are comparing the cost of capital to our competitors, we are quite competitive.
However, it's a challenge to see how their share is priced compared to all the values, making it impossible for us to use the share as a kind of a currency to make M&A transactions and similar. I'll go through the relevant financial targets, where we are today. We have an equity ratio today around 28%. That is not the level that we are targeting. We come back to that, how we could approach that level. Also, as we have mentioned a few times before, to decrease cash breakeven is high on agenda for us. We have been partly succeeding in that for the last couple of years. As I mentioned, we are attracting a bit new debt now because of the new deliveries.
It will take some time before we can reach our targets and goals, but we will get there and we are working quite constructively to reach that target. Also optimize the debt structure, according to the collaterals available for various structures, and also having a loan-to-value average for our fleets that is within the range that we are targeting, and of course then lowering the cost of capital on the long term. I will also go through the return on invested capital, how we think about that. We have invested a lot in new vessels the last couple of years, and also streamline our terminal portfolio. I think that should lead to improved return on invested capital going forward based on the market expectations we have for today.
If we succeed in reaching these financial targets, we should then be able to reach our long-term target for the company, meaning that we have attractive capital resources available, meaning that we are able to manage risk. We are in a cyclical business. We are living under certain times, and that will continue. We need to make sure that we have a capital structure that is taking care of that also when the market is turning down. Of course, having a competitive cost of capital and be able to secure growth and flexibility. We have a platform where we can grow today. The balance sheet is putting restraint on us, but it's important then to create the capital structure going forward where we are then able to take advantage of opportunities that may arise in the market.
Of course, as also Kristian mentioned, to secure attractive returns for our shareholders long term is very much the overall goal for what we are doing. Starting with the capital structure on the debt side. This is a slide we have shown a few times before. We have an overall ambition to reduce the total debt in the company from today's level at around $1.2 billion to be in a range of $750 million-$900 million.
That is divided into various initiatives here. If we achieve those initiatives, we should be able to reduce the necessary cash breakeven around $3,375 per day, meaning that we reach our target of around $18,000-$19,000 per day in cash breakeven, which is then kind of very much comparable with the lowest rate we have seen at the last 10 years. That should enable us to also have a positive cash flow in the downturns that may and will come into the future as well. We have done, as I said, a few things on the financing side lately. That means that we have increased the debt actually, while the long-term ambition is to also decrease the secured amortized debt. Going forward, when all the newbuildings have been delivered, we have a clear ambition to start reducing the overall debt in the company.
We are also working quite constructively to extend the average amortization profile for our loans. Today, it's around 8.5 years on average. Target is to stretch that to 12 years. If we achieve that, we are talking about a reduction of $2,000 per day in cash breakeven. So far, for the last 12 months, we have done a lot of refinancing. We have extended the profile for 11 out of 14 vessels in total. Also plan to leave some unencumbered assets. We have actually financed a few unencumbered vessels this second quarter, but that is due to the bond maturity in January next year that I will come back to. Then, as a total asset, we have an ambition to reduce the cash breakeven $3,300 per day. So far, we have achieved $290 per day for our total fleet.
Moving on with the capital structure and the debt side. We have quite limited refinancing needs in the coming two years actually. Most important is the bond that is maturing in January 2020. We realized that the bond market now is more or less closed, especially if we want to do that at decent terms, compared to what we have done lately. We have initiated a plan to take care of that maturity without going to the bond market and having to pay the prices that are offered today. We started with that early this year. We did a tap issue in January, securing $33 million in liquidity. We have mortgaged a few unencumbered vessels with around $15 million. We also did a transaction a couple of months ago where we sold all the terminals in Dalian, which will increase our liquidity by around $27 million.
In addition, we are in quite advanced processes to add on further liquidity to have a buffer. We are considering to refinance a few of our vessels with a quite low loan-to-value. That process is very much developed, and we have a plan to secure up to $50 million in new liquidity with refinancing those vessels. In addition, we are in discussions with a couple of banks to secure a new liquidity facility, also kind of targeting a possible repayment of the bond in January 2020 without issuing a new bond in the market. That facility will be available. Of course, we don't want to draw on that facility before possible repayment of the bond in January, so we will not add too much interest cost on our P&L.
If we succeed with these initiatives, we should be more than covered to take care of the bond maturity in January with around $83 million to be repaid. Also to make sure that we have the necessary flexibility to not increase the cost of capital, debt capital. We can use the revolving credit facility that we secured last year in total $118 million, and temporarily repay that loan in the period where we are taking up new loans to be prepared for repayment of the bond. We will not take too much debt on the balance sheet, and we will not increase the cost of capital too much based on this plan that we are working on. Capital structure, we cannot talk about that without talking about equity. As I said, we think we are quite competitive in terms of the cost of capital.
Cost of mortgage funding is very much stable compared to where we were one year ago. I also see that the sale and leasebacks interest are quite stable, slightly increased. That has to do with the average age of the fleet or the vessels that we are refinancing. Also looking at the time charter and bareboat arrangement, we have an interest cost around 5%, which we think is quite competitive. The bonds, we did a tap issue in January. We did that at better levels than we had seen in a couple of years actually. Of course, looking at the bonds, how they are priced today, that is quite different from what we are actually paying on these outstanding bonds.
Of course, that is also tying into why we are preparing a plan for taking care of the bond maturity without going to the bond market in today's situation. Our biggest challenge remains the equity, how that is priced. We have updated some NAV estimates here to give an indication what we think about our values. What we have used here is indicative broker values, which we summarize that. Also installments on the new buildings and excess values on the new buildings. Our total fleet should be valued around $1.5 billion. The debt attached to those vessels is around $960 million, giving a net fleet value of $551 million. If you add just the book value of our joint ventures in Odfjell Terminals and Odfjell Gas, we should be in the range of $700 million before the bond that is on the balance sheet.
If you distract that, we are around $500 million in NAV compared to a book value just above $500 million. Of course, if you look at the market cap, how the share is priced, we are looking at the price book around 40%, which we think is a challenge for us and makes it very difficult to use our share as a currency. How to address that? That is the biggest challenge. Of course, we think that working with a more efficient capital structure, reducing the cash breakeven, and also making sure that we are able to pay dividend also throughout the cycle.
That should be working in advantage and be something that the shareholders appreciate and should influence the price on the share in the long term. Of course, also being able to deliver profitable results we think should be beneficial for how the share is priced and liquidity of the share. If you look then at our financial targets, what are our targets, where we are today, and what we think going forward. As I mentioned, the equity ratio is not at the level we would like it to be. We are around 28% today. We have an ambition to be in a range of 30%-40%. Depending where we are in the market cycles, we are certainly below that.
Even though we have positive market expectations, so we think it's kind of dependable to have an equity rate of 28%, we would like to be higher up in that range. That also underlines why we are focusing on deleveraging the balance sheet and why we are focusing on decreasing the cash breakeven for the company. Also looking at the loan-to-value, we have rather high loan-to-values on our fleet today that has been increasing for a couple of years. Today, we are on 64%, increased stable since 2016 at 59%, with an aim to be an average for our fleets within 55%-60%. Even though we have still some headroom in today, we have some vessels that are booked or have a loan-to-value close to 90%, where we also have vessels with around 40% loan-to-value.
We have a flexibility there, but on average, going forward, we'd like that to be decreased. Again, that's essentially what we are focusing on, the leverage of our balance sheet and reducing the debt going forward. Cash breakeven, I mentioned a few times. This is showing how that has developed since 2014. We see that cash breakeven has come down quite substantially, I would say, from $26,000 in 2014 to around $21,000 today. Main reason for that is that the cost initiatives that we initiated in 2014 and 2015 has impacted our cash breakeven positively. However, we saw an increase in the cash breakeven in 2019, mainly due to our fleet growth and the fleet renewal. We had to attract new debt also kind of increasing the cash breakeven. Our aim to reach $18,000-$19,000 stays.
As I said, if we reach that level, we should then be able to pay out dividend throughout the cycle. Just to mention that cash breakeven, what we mean by that is the cash or the time that you need to cover your OPEX, G&A interest and debt amortization. Of course, it's market dependent when we will deliver that and reach that level. We think that it should be reachable if we continue on today's path. As Christian said, we have delivered okay so far this year. If the market develops how we expect it to in the coming years, we should be able to come closer to that level in 2022 based on what we are looking at today. Financial targets and free cash flow to equity.
We get a lot of questions from our shareholders when we are going to deliver positive cash flow to equity. Of course, that is important for us as well. Looking at the historical figures, looking at annual free cash flow, that has been negative for a few years and also this year, mainly due to the loss that we have delivered, but also due to the investments that we have been doing the last few years. This year, we then expect negative $76 million in annual free cash flow in negative. Based on all the newbuildings being delivered this year and very limited CapEx the coming years, we should see based on average time earnings the last five years, if that repeats itself for 2021 and 2022, we should then be able to deliver a positive cash flow of around $126 million.
Also looking after financing, we should see improved cash flow to equity. This year, again, we are doing a lot of investment. We are taking on new debt to cover those investments. Based on the earnings first quarter this year, if we annualize that, the net cash flow to equity this year will be around $0 or +$3 million. If we estimate future earnings the same level as average time charter the last five years, we should be able to deliver a positive cash flow to equity around $30 million average for 2021 and 2022. We also included here the volatility or the potential upside, showing that if we are able to increase the TC rate with $1,000 per day, we should be able to deliver additional cash flow to equity around $24 million.
If we additionally also are able to decrease cash breakeven with $1,000 per day, that should be additional $24 million. It doesn't take too much to be able to deliver a much more positive cash flow to equity. Again, it's dependent on the market and how fast that develops. Return on invested capital. Financial targets. We have been streamlining our portfolio for terminal assets for the last couple of years. Today, we have a much more sound portfolio assets. We also have slimmed down the overhead for the terminal business quite substantially to a more solid portfolio and also more streamlined organization. We see that first quarter this year, we delivered return on invested capital around 13%, which is the highest level that we have seen in a couple of years.
We think that's a good indicator what we could expect from our terminals going forward. Also on the tanker side, we have done a lot of investments the last couple of years, 28 new transactions in total. Still a few newbuildings to be delivered. Looking at the returns from the newbuildings and what we have done on the fleet transactions the last couple of years, we see that that should also lead to increased return on invested capital. First quarter this year, we saw return on invested capital of 6%. If you look at the newbuildings and new transactions we have done, we are around 6.4%, not that much higher. At the same time, we need to keep in mind that these are newbuildings. We are including maiden voyages, et cetera, that will also then expect to be delivering increased returns going forward.
Especially, we can see that the CTG acquisition, also the Sinochem Bareboat arrangement, has delivered quite good returns in the first quarter. Of course, that is also reflecting good timing. Actually, we had on those transactions when we did that in the market. Looking at the new time charters we have included here, it's delivering a negative return in the first quarter. Of course, these are more based on the newbuilding prices and the transaction structure at that time, and we expect those to deliver an increased return on invested capital going forward. A short summary. We are very much focusing on the capital structure, reducing debt. We are well prepared to take care of the bond maturity in January next year.
We are keeping focus on reducing the debt when we have the newbuildings delivered to decrease the cash breakeven, where we have an aim to come to a level of around $80 million-$90 million by 2022. That is a tough target. Of course, market dependent, but we are working quite actively to reach those levels and also to be able to deliver free cash flow to equity. Of course, we see our new builds, our new transactions have been delivering positive results to our total portfolio vessels, and we expect that to continue going forward. Now I think I will leave the road to you, Kristian. Thank you.
Thank you, Terje. I will take you through the market updates and the future demand supply dynamics in light of the current economic turmoil we're facing. Before I start, just as a reminder, if you want to pose questions, you can do that as we go along, we can summarize the questions towards the end. Starting with the demand situation. I would like to start by taking a closer look in the rear-view mirror as a start, as the last couple of years, of course, also plays a role in how our markets are faring in the current economic environment. Starting here on slide 21, if you start by looking at the first and second quarter of 2018, that was the first quarters in a couple of years where demand outpaced supply growth.
What happened in the third quarter was seasonality, of course, playing a role, taking a toll on demand. You also saw the first wave of major competition coming from the CPP design vessels, which pushed supply growth to very high levels and contributed to 2018 being one of the most challenging years in the history of our market. In the red stipulated line there, you will see the fleet growth for chemical tankers alone. This is not reflecting the swing tonnage effect. As you can see then on the dark blue line, the ton-milel demand grew quite nicely in the fourth quarter, and that stemmed from organic chemical plant startups in the U.S. and the Middle East starting to impact our market, and especially the mild component of the demand denominator for shipping.
This was also supported by strong veg-oil exports, all this countered a weaker GDP growth sentiment in the market driven by the escalation of the trade war. This strong demand environment continued up until late third quarter, where the attack on the Saudi oil installations took place, that impacted chemical tanker demand in the way that crude oil installations were shut down, so were the major refineries producing naphtha, which is the main feedstock for petrochemical producers. This in turn, of course, led to reduced shipments as the petrochemical producers were sidelined, as there were uncertainties of when they would receive their feedstock. We saw a catch-up effect in the fourth quarter of 2019 where the market was much stronger, also driven by the Middle East.
Also you saw the IMO 2020 effect where we saw a reduced swing tonnage, where the underlying fundamentals for chemical tankers and how strong it is came clearer into light. Adding the product bases on what has been driving the growth for the last couple of years. You can see here that the organic chemicals are contributing to this growth quite significantly. Also the veg oils, driven especially by palm oil, has been very strong throughout 2019. If you turn to COVID-19, in the right corner, you see the orange there is veg oils, and that is related to Chinese imports. There's basically two routes that is driving that negative growth year-over-year, and that is 600,000 tons of reduced exports from Indonesia to China. You have 1 million tons of reduced imports to India from Malaysia.
It basically stems from two routes, while the traditional chemicals, petrochemicals in that sense, are doing fairly well also in the first quarter on a year-over-year basis. A bit further on, this also relates to what we touched upon in the first quarter presentation. I mean, the chemical industry, in light of COVID-19, was quickly considered to be an essential industry in most countries. We can say that operations production has been ongoing. People have gone to work. You can see that also from our terminals worldwide. Of course, we have seen some shutdowns for some plants. We have seen some reduced operating rates for some selected products. You have seen some new plants deferring their startup to later of the year.
We've also seen some disruptions when it comes to maintenance of the chemical plants, where these have been pushed further out as components and equipment, they have not been able to source that. Fairly similar as the shipping issues when it comes to docking that we have experienced. The regional outbreaks is also extremely important to take into effect, as we are in the business of seaborne trade. The outbreak in China, of course, concerned us back in February. In hindsight, this developing across the world, and at different times has, of course, been what has also helped our market since this has stimulated seaborne trade of chemicals. We also saw in China that this occurred during the lunar holiday or just before, although most of the business was closed down already and that the business had been done prior to that.
When they returned, we saw that they announced export rebates and we saw heavy port congestion, because of COVID-19, but also because of weather-related congestion, which also helped the market absorb tonnage and tightened the market throughout the first quarter. The same could say about Europe, where we saw immediately a shift into stronger exports accounting parts of the reduced imports. Of course, the Atlantic Basin was also fueled by a strong CPP market as well. Based on the regional outbreaks out there, you can say that most of the trade routes are doing fairly well all things considered, while imports into Europe and South America are among the weakest trade lanes. Combining all the routes together, as Kristian also said, we have been doing fairly well so far.
Naturally, also the feedstock dynamic has changed with the lower oil price in light of COVID-19 and also as I will get back to a little bit later on, due to the oil price war. Naphtha is the main feedstock for chemical production. Of course, you saw that the producers of solvents being PET plants, PTA plants, saw an opportunity to source cheap feedstock and kept their operations running. This, of course, happened especially in Asia, and of course, supported deep sea shipments and supported our markets in the last couple months. Lastly here, demand for chemical tankers is highly diversified, both in terms of the number of products we ship, but also in terms of a highly diversified end user market, for every product. This means that there were both winners and losers in any potential prolonged economic downturn.
The food and agricultural industry are the biggest consumers of liquid chemicals, accounting for more than 30% of consumption in total. This consumer group is viewed as fairly resilient to economic downturns, and we are not seeing or expecting any material impact so far during the pandemic. You have 10% of the liquid chemicals being fed into electronics, various home supplies, packaging and various other hard plastic appliances where demand output becomes mixed in economic downturns. During COVID-19, it appears to have a neutral to only a slightly negative effect. The textile industry accounts for 10% of the demand for products shipped by chemical tankers, and here the demand is in large driven by Asia, which is recovering quickly.
Although the exposure towards shipments of the finished textiles are exposed to a potential prolonged downturn in the Western Hemisphere, we find that initially demand has correlated more with Asian demand rather than demand in the West, which is explained by a large share of the liquid volumes being fed into receiving plants that is targeting the domestic market rather than the global market. The two end user demand groups that we wish to highlight that are most exposed to a prolonged economic downturn and where we have seen a drop in demand already is the construction and automotive industry. We see the construction industry having the potential to recover quickly in light of potential economic stimulus, so this will be important to follow going forward.
When it comes to demand from the automotive industry, the potential we would say is threefold, with one demand driver being auto production, driving demand for parts and various under the hood equipment, likely the most vulnerable when it comes to a quick recovery in demand. The other side of automotive demand relates to various fuel blends, which could recover quickly when lockdown eases across the globe. Generically speaking, though, we count less than 30% of the liquid chemicals we ship to have a negative exposure to a prolonged economic downturn, while the remaining products should range from slightly negative to neutral to also positive in some instances. This in some makes us not see a prolonged downturn in demand. We should follow the trends seen in the aftermath of the 2008 financial crisis. Of course, the jury is still out on that.
Based on what we are seeing, we are and also performing in a way, it looks like we could weather the storm as well. COVID-19 situation aside for a couple of minutes, there was also other major events taking place in the first half of 2020. Of course, then I'm speaking about the oil price drop and the oil price war on top of the COVID-19 outbreak. As initially mentioned, we have been focusing the last couple of years a lot about the growth of gas-based chemicals out of the U.S. It's important not to forget that the vast majority of chemical crackers around the world are heavily reliant on naphtha as a feedstock. Today you have 70% roughly of the global cracker capacity is consuming or preferring a naphtha.
Some of them are also flexible, of course, through LPG and other sources. Of course, when this oil price drop hit the market, as the middle graph here shows, the naphtha price closed the gap quite significantly towards ethane-based crackers in the U.S. Of course, this led to a reduced competitiveness, but also as the graph highlights, the competitiveness is not gone. While this initially had a positive effect, and while we do expect U.S. volumes to continue flowing in such an oil price environment, it's clear that this has been a help so far. The negative effect is more of long-term investments based on U.S. chemical producers, rather than not being able to sell their products at all.
Of course, as the producers themselves state that if the competitors are making good money, it's more difficult to gain market share across the globe compared to when they are having a much bigger spread towards the naphtha-based crackers. On the right side, we just highlighted three of the liquid organic chemicals. This just confirms the picture of the middle graph, where you saw there was a short-term spike in European and North Asia's competitiveness when it comes to margins. This has come quickly down again as oil prices have increased. Also we have seen some correction in the end user prices. Further on, slide 26. We mentioned briefly the last couple of years, the growth, and that has been fueled by organic chemical capacity being built and expanded in the U.S. and the Middle East.
That has been driving total demand growth to historical high levels in our segment. This is expected to normalize going forward, though. This is, of course, in light of the economic uncertainty driven by the trade war that escalated in late 2018, which did not create a healthy environment or a positive environment for further investments. Another factor, of course, accounting to why we don't see a major round of new investments taking place is, of course, that there has been a heavy investment period for the chemical producers, and several of these product chains have already faced margin pressure even before COVID-19 as they enter into an oversupply situation. Of course, this should lead to a slower contribution from that growth driver in the next couple of years, we might see some, but in general, this should normalize demand growth going forward.
Of course, COVID-19 is not exactly fueling sentiment when it comes to new investments going forward. Turning to the supply side. There has been a lot of encouraging developments for demand in the last couple of years. It's still encouraging, we have to say. Of course, the COVID-19 situation is clouding the picture. Turning to supply, here we have highlighted three of the main drivers going forward. If you see the top graph, we have combined all the tanker segments, crude tankers, product tankers, and chemical tankers, and the size of the order book compared to the trading fleet as of today.
As the light blue graph bar tells you on the top graph, this has reached historical lows where chemical tanker orderbook share is 4.5%, we find it encouraging that also the neighboring tanker segments also are not experiencing high orderbooks in the current phase or current situation we are in. Further to the second factor here is the age distribution. It's important to remember that the chemical tanker fleet grew by 70% in the mid-2000s based on the China boom and their entrance into the World Trade Organization. Of course, in the next 5 - 10 years, a large share of that fleet is going to become older, less inefficient and not necessarily technically advanced vessels.
Here we've highlighted the ships in our fleet today between 1991 and 2010 accounting for roughly 50%, where suddenly you can say that in the next 5- 10 years you have to consider whether you're going to continue sailing it, are you competitive, et cetera. As the bottom graph shows, that is also at an all-time low with a year-to-date orders of the total trading fleet is at 1% level. Normally this happens when you don't have belief in the future.
As I will point out in the next couple of slides, it's all about regulations that of course, makes us encouraged about the future supply situation for the first time in many, many years. Not only for chemical tankers but I guess for shipping as a whole. In the next slide 28. IMO has gone from many years of a main focus being on safety measures for the shipping industry to turn the main focus now towards environmental regulations for our industry. They have just passed the sulfur cap regulations, and then the industry is turning its eye towards new environmental regulations to further reduce the carbon footprint of the shipping industry. The long-term target is to reach a 50% emission reduction by 2050 compared to the 2008 levels or baseline, as we call it.
On the way to 2050, though, there will be a target to reduce emissions by 40% by 2030, which is where the biggest hurdle for the shipping industry is today. That being said, it's very important to highlight that final details on the roadmap is not yet ready, and it's also very important to highlight that the 40% reduction by 2030 is for the shipping industry as a whole and not for every ship or every segment, which means you should expect some segments and vessel types will have to carry more of the weight than others. As mentioned, the details surrounding how this will play out is something the industry is still waiting to get clarity on, and this clarity has been delayed due to the COVID-19 situation.
What is clear though, and what we wish to highlight on this slide is that by 2030, we have reached a point where we believe alternative fuels needs to play a part of the role to achieve further improvements. This, of course, on the next slide, brings us to the dilemma facing ship owners today. What kind of fuels should you choose for your next ship? Naturally, choosing the wrong engine or opting for the fuel that won't be the fuel of choice or being competitive for the 25-year lifetime of your ship would be destructive for this investment, and the residual value on your ship will be a large risk factor. Here we highlight 10 various fuel types. The 4 fuel types to the left, LPG, methanol, DME, and LNG, where technical and availability are in various degrees, not the biggest problem.
None of them will, however, be the long-term solution to meet the regulations on emissions and should be viewed as intermediate fuels before a long-term compliant fuel is in place. To the right of these fuels, you have the fuels that will be emission-free and therefore most likely a part of the long-term solution. However, as the circles and the percentages highlights, there are technical and availability hurdles. Batteries, for example, we will need three sister ships to sail with batteries behind our ships to include a voyage. A viable solution for short sea ferries on the water for 10 minutes at a time, yes, but not for deep sea large ships. Thorium highlighted could be one solution, but everything related to radioactivity is politically difficult, as you are aware of.
Should this be the solution for the future, you could fuel your new building at delivery, and you won't have to fuel again for the next 30 years. Further to the solutions that as of now could be a part of the long-term solution is hydrogen and ammonia. While we do see hydrogen more as an energy carrier than as a fuel due to its high energy density, where 25% of our hull will have to be utilized, and in liquid form, this problem is smaller but creates questions on the temperature that gets as low as - 250 degrees Celsius. That puts this fuel type also into question. That leaves us with ammonia, although not completely optimal, as the orange colors implies, this could be a realistic solution in the long term, but this is still at a very immature stage.
Hopefully this slide creates an image of the dilemma faced for the shipping industry when it comes to ordering a ship. The short answer is, of course, no one knows what the future will bring as of yet, and there will be potentially also various changes to this slide as well when it comes to technology development, et cetera. The main message here is basically that hope you see that this could potentially keep a lid on speculative larger new building orders in the next couple of years. Leads me to summarize. We do expect demand growth to remain positive. We have tweaked and tried to create very negative scenarios on a product-by-product basis. It's really hard to say that this should collapse based on how we see the world today and how our products are faring and the dynamics and the drivers behind them.
We expect 2%-4% demand growth in the next couple of years with a 2% scenario being a prolonged economic effect from the COVID-19 shutdowns and the recovery from that part. 4% is more normalized growth, which is still considered high in a historical context. We should see a recovery in line with what external economists, et cetera, are seeing starting from 2021. On the supply side which is encouraging, which leads to us seeing the deviation between demand and supply being fairly unchanged in the next couple of years. We expect 1% supply growth driven by lack of new orders in the short term. We also see positive supply dynamics in the neighboring segments, which hopefully will keep control of the swing tonnage effect.
Of course, we are seeing very low orderbook-to-fleet ratio also in our own segment, which should lead to roughly a 1% supply growth in the next couple of years. That's it for me on the supply and demand side. Then I'll just leave the word back to Kristian for some final remarks before we are ready for questions. Thank you.
Thank you, Bjørn Kristian. I'm not going to try to summarize everything that was said in the last hour. I can see that we have had two questions posed, and while we address those, please do post more questions if you want us to cover them during this presentation. I think as you saw today, our main message is that 2020 has started quite well. Operationally, we're doing quite well despite the coronavirus. We are encouraged by what we see and also in terms of the data from the demand picture that Bjørn Kristian spoke about. It's also clear that we are approaching the second half of this year with caution, and we are less and less concerned about the pandemic itself and more concerned about what may come after.
Personally, I think one of the biggest risks is, of course if there's a second wave of pandemic and so on, but we will have to deal with what's in front of us. In the meantime, we are happy to see that our platform is performing. As I said, you will need to really stretch your imagination to think if we're going into negative demand territory. The future will show. I think that was the comments that we have. I think let's take the two questions that are posted and as I said, please remember to post questions if you want us to cover anything here last minute.
Starting with the first question to you, Kristian. Are you considering merging the A-shares and B-shares to increase liquidity in the shares? If not, why not?
Yeah, I think that is a question we get a lot. I think, the short answer to that question is this is something we would really like. I think it would make sense to do it. You also have to consider a couple of things when you consider that question. First of all, you have to convince all shareholders to do it. We had a process some years ago that stopped just short of that. It is something that we would like to do, but, we need to convince the shareholders. Then I also want to remind, I do not know who asked that question, but remind everyone listening here that it is not only bad things that come from the two share classes.
In times of crisis that the ones that we have been through in the last couple of years and with a share that's trading at half of book value and even less than NAV, we don't have to worry about any hostile attempts on the shares and so on, because we have a shareholder that's in good control. That's actually a blessing. The second thing you need to consider is that yes, of course, it would solve some of the liquidity issues, but I'm not personally convinced that, it would be one silver bullet. That's not a way of saying that we are not considering it. This is something that I think we would like to do. When the shareholders are ready to accept it, this is something that we as management would absolutely recommend.
The next question, to you, Terje. How do you calculate cost of capital in return on invested capital with the time charters and variables and no invested capital in my view with the TC?
I think I understand where the question is coming from. We showed in the overview of our vessel transactions that our two new time charter, long-term time charter have delivered a negative 4% return on invested capital since we took over the vessels. Of course, there are no attached investment to those time charter. That is correct. There are no upfront payments. We are paying a time charter per day, monthly. The way we book it in our accounts, we took it in as what you call right-of-use assets according to IFRS 16 from 1st of January 2019. Meaning that we are decomposing the time charter rate that we pay and decompose it up to installments interest, and depreciations. The way we book it, we can calculate theoretically what is the return on invested capital from an accounting perspective.
You are correct, there are no actual investments that we are calculating the return on.
Further to you Terje. Will debt repayments have preference over dividends in the coming years in order to reduce cash breakeven?
I think that is correct. Based on what I've said and we have said, repaying debt is high on agenda. We want to increase our equity percentage and deleverage our balance sheets. We could potentially also pay some dividend, of course, depending on the actual returns that we are delivering in the coming years. The first priority will be to reduce that, to have a deleveraged balance sheet compared to where we are today.
Buying own shares seems to be a very good investment at the moment, better than buying ships. Is this a topic?
Today we have an authorization, and the board has an authorization to buy own shares. That is more or less fully utilized. We own close to 10% of our own shares. Instead of buying more shares, we could potentially do something with the shares we have on our balance sheets. Today that is not on the agenda.
Okay. Then, a question for you, Kristian, I guess on the operational side. How do you think about future contract coverage?
Yeah, that's a really good question. I think we have said previously that, we don't want it too high. Because if you are contracted around 80% or 90% or whatever, you lose the flexibility in your system. You need to commit the tonnage to go whether you're full or not, and it's a very rigid system. You don't want it too high, but you don't want it too low either. This is not like a product tanker company where you are purely exposed to trading. I mean, many of our customers move their products in fixed trades, and by having contract coverage, I would say not less than 50%, we have a base cargo and a base understanding of where the fleet is going to go. I think the sweet spot is probably around 50%-60%. That's where we like to be.
Of course, the lower the contract covers, the more dependent you are on the spot market. If you have a flexibility in the fleet at the same time, then in the scenario where things kind of become really bad, you also have the ability to redeliver ships because you're not committed to contracts. We think that the sweet spot is probably somewhere between 50%-60% as an average. In some trades it's higher, and in some trades we are happier with lower coverage.
Thank you. There appears to be no further questions online at the moment. Maybe you can do some final remarks.
Yeah. No. All right. This was the first time for an online Capital Market Day. I hope that you enjoyed it. The fact that we had to make it a little bit more compact than usual might leave outstanding questions. As I said in the beginning, if you have any questions after this, please feel free to reach out to Bjørn Kristian or Terje or myself. We'll be happy to answer the questions. This is the first time that we are live streaming ourselves. If you have any comments or questions or good advice in terms of how we can improve on that, we are always looking for good feedback. Please, also drop us a line if you think there are things that we could learn and improve.
Meanwhile, I hope that everybody stays safe and look forward to seeing you again, live maybe next time.