Good morning, and welcome to Odfjell SE's Annual Capital Markets Day for 2021. This is the 6th consecutive Capital Markets Day we're hosting. And this year, as we did also last year, is hosted online due to the circumstances across the globe. And hopefully, we'll be able to have this live and to meet you all next year. But we have an exciting agenda for you today with more thematic views than what we had last year.
First, we will start with our CEO, Kristian Norg, who will take you through our strategy, which can be summed up in capturing the near term while derisking the long term. After Christian, our VP, Technology, who is not that familiar to most of you, Mr. Erik Upland will present the next topic, which is energy transition. A bit about Erik. He has been with Odfjell since 2007 and is today heading all the department where future fuel and emission regulations are one of his key tasks.
In his 14 years in Orteville, he has been instrumental in the systematic process of making our fleet most fuel efficient in the world. He is a board member of Maritime CleanTech and a member of D and D's environmental committee together with all the relevant committees. So please take the opportunity to ask questions while you have the opportunity to Erik as we approach the end of this session. After Erik, more known to most of you, our CFO, Tage Aviation will give you a finance update on relevant topics before we'll hand over to the last speaker of today, which is going to be produced presented by Global Edel Tanki Trading, Bjorn Hamblin. Bjorn has been with Odfjell since 2007 and has held various roles in the company.
Before becoming the head of our trading department, he was heading tonnage procurement and therefore played a vital role in the successful fleet renewal we have just put behind us. Today, Bjorn is in charge of our about 140 charterers and operators across the globe, and we'll give you his insights into the supply dynamics and its effect on our market before ending with how Odfjell is uniquely positioned in a strong chemical tanker cycle. Then Kristian will conclude the session with final remarks before we move over to the Q and A. And with regards to Q and A, please post your questions throughout the session, and we will at the end of the event, direct the questions to the relevant speaker. So now it's time for me to hand over the word to Christian, who will start the session.
All right. Thank you very much, Bjorn Christian, and thank you for taking the Time to listening in on the Capital Markets Day. As Bjorn Kristian said, we are doing this virtually, but hope that next year we can have a more engaging session with a face to face session somewhere. I will be talking today a little bit. I'll talk About the COVID-nineteen, then I'll give you a very high level strategy update and a market outlook.
And then I'll talk about Our fleet renewal and the advantages that we get there with that. And then finally, I'll give you a short comment on carbon emission before I hand it over to Erik, who's going to talk about the technology shift that challenge that we all have ahead of us. COVID-nineteen has been an operational challenge for Odfjell. It has been with us now for, let's say, 18 months. And it's easy to forget now that the vaccine is how big an operational challenge it has really been.
But we think that the Otschfield platform Has passed the test in terms of how we haven't been dealing with this pandemic. First of all, if you look at the bottom left hand corner and you look at our safety In 2020, it was improved actually compared to 2019. And so far, 2021, we are also off to a good start. Our LTI frequency is very low levels. In terms of the operations, for most of the year, we have been operating the company on, let's say, remote control.
And the single biggest operational challenge we have had has been the crude changes. If you look at the second bar, on the bottom, you can see that the overhang we had Overdue shiftings in November 2020 compared to June 2021. Today, we have been clearing a lot of that overhang. It still continues to be a challenge to move people safely around the world and so that part is not over. But in general, in our Operations, we have been operating quite well throughout the COVID-nineteen.
In terms of commercial performance, we have We redelivered 24 ships and taken delivery of 40 new ships during that period. So we have concluded the largest fleet renewal in the history of the company. We have improved our COA portfolio and let's not also forget what happened in the Q2 of 2020 when the product tanker market spiked. We actually managed to take quite good Advantage of that market in the Q2 of 2020, and I'll speak a little bit about that in terms of having available capacity when the markets go up. On the right hand corner, you can see the net profit in 2020.
It was the strongest year we had since 2016. At the same time, we issued the 1st Sustainability linked bond in the shipping industry globally and we have reduced our breakeven levels. So I think That the Odfjell platform has really passed the test. We are quite pleased with how we have operated throughout the, let's say, the COVID-nineteen crisis or or whatever we want to call it. And that leads us to the conclusion really that the transformation of Odfjell, which we have worked on Heart for the last, say, 6 years has really been completed.
That is not to say that we don't have challenges. We have quite a lot of challenges ahead of us like the rest of the industry, but those challenges are no longer, let's say, internal structural problems based on internal inefficiencies and so on. There are external challenges that we can use our energy in terms of how we engage with those. So really, we believe that the transformation has been completed and it's time to look forward and we do stand on a very strong platform in terms of how we engage with those challenges. Now I'll talk a little bit about our strategy from a high level.
And in a nutshell, the Way that we think about strategy is that our strategy is designed to capture the short term while at the same time derisking the long term. And I'll try to explain a little bit our thinking behind that. First of all, if you look at the short term, what you'll see also later Today is that we believe that we are standing just in front of an upturn in the chemical tanker market. There's a very strong demand story. There's Also a strong supply story, strong in the sense that there's very limited new capacity coming in.
That's a very good story for Or highly likely whether we will go into plus 90% utilization of the fleet and when that happens, then you are in a high cycle. And because of the uncertainty on technology, we believe that it's going to be a while before we see an influx of a lot of orders. So I think we are in the next, say, 2 to 3 years, it will be a good period. So that's what we mean about the short term, whereas when you look at the long term, they are it's a little bit more difficult to see clearly. Yes, it's a technology shift that's going to happen and the world and the Odfjell and nobody really has an answer in terms of how that's going to play out.
There's a regulatory pressure, there's customer pressure, There's inflation risk, there's world GDP risk and there's a lot of things that can happen. So the picture on the long term is slightly more challenging to see clearly. So our strategy is designed to capture the short term. And how are we going to do that? Well, first of all, when in an ongoing market, you need to have capacity to sell.
So we need to make sure that we have we keep some capacity free. That does not mean that we will not do contracts, but it means that we will keep a part of our capacity free. Back to my story about what happened in the Q2 of 2020 when this product tanker market spiked, we actually had free capacity and we could make good use of those markets. So it's about having capacity to sell in an ongoing market. It's also a matter of selling intelligently.
Don't log in Trade for the next couple of years when you're going into a high cycle, it's about having efficiency, good efficiency and focus on new operations. So you deliver on your promises to your customers, so they will return. So that's basic kind of operational basic operational view. But very much, I mean, when you capture it, it's about having that capacity available when that option comes without bidding the farm on that, that will happen. So as I repeat again, this does not mean that we will not have contracts, but it means that we will have free capacity to sell.
In terms of derisking the long term, It's very much about strengthening the balance sheet, reducing cost of debt, and Thierry is going to speak more about that in his section later. It's also about reducing our Closer to conventional technology, and Erik will talk about that. And then it's about maintaining what we believe we have today, which is the market leadership within ESG because have the most energy efficient fleet in the world and we believe that that's a competitive advantage and I'll talk about that also a little bit later in my section. Our long term goals for Odfjell are largely unchanged. On safety, it's about 0 incidents.
We still have an ambition to grow the business with 10% per year. That will never be a straight line, but we need to grow the business. In terms of financial performance, we have an ambition to have industry leading EBITDA margins and also to Provide attractive returns for our shareholders and have a more transparent dividend policy. I'll speak about that in a moment. So the key words for tankers is to benefit from scale advantages.
Customers will feel that because we offer better services in terms of cost Efficiency and predictability. And internally in our own performance, it means that we will have efficiency gains and unit cost reductions. And then it's also about maintaining the market leadership we think we have in ESG. On terminals, we have been going backwards for a number of years and now it's Time to go forward again. We want to have a meaningful global network of terminals.
And we say here that terminals should be a minimum 33% of our activities. We get a lot of questions about what does activities mean, whether that's balance sheet or turnover or whatever. I cannot give you a very precise Answer to that, but the point we want to make is that if we have to own and operate terminals, they have to be a significant part of the business that we have. And we believe from an activity level, Whichever way you measure that, it has to be, let's say, close to a third and that and we are not there today, so that indirectly means that we are going to find a way to grow our terminal business. If we look at the demand side and we start a little bit of looking at demand side from our customers' What kind of world do they live in at the moment?
On the bottom of this slide, you can we have taken the top 10 chemical producers in the world and We have added their sales forecast going forward. And as you can see, the total sales in 2020 was $523,000,000,000 In 2021, that number is going to go
up to
$636,000,000,000 and in 2022, it's going to go up to $680,000,000,000 So $680,000,000,000 in 2022, that's a 7% increase from 2021, but it's a 30% increase from 2020. And I realize that sales is a function of both volume and price. But if you look at it from our customers' perspective, then This is a picture that tells a very strong story about the demand. Anyone who has tried to buy a new bicycle these days or home improvement tools Whatever. Know that there's quite a lot of scarcity in terms of getting the durable goods produced.
The entire supply chain, if you look at container lines, is scrambling to meet the demand worldwide, and that fills us through to the chemical producers. So there's a very, very strong fundamental demand for chemicals. And at the same time, you have actually seen a destocking, especially in Asia, quite significant destocking. So we are also approaching apart from the growth, we are also approaching a restocking cycle. So that paints a very positive picture about the demand.
There's been some disruptions with the weather situations in the U. S. Gulf and the big freeze in Texas and we are still recovering from that. Believe it or not, that's how long it takes because the Supply chains are quite fragile. So from a customer's perspective, there's quite a lot of good things to say about fundamental demand for their products, which is good for us.
And not getting here you go. And that fundamental demand for chemicals is also going to be good for shipping because the key part in the shipping story in terms of The difference between actual demand for chemicals and tonne miles is the fact that chemicals on average, they travel longer distances than they have done historically. It is very much U. S.-based and Middle East based production that's coming on stream and the increase in oil prices and the increase in feedstock prices means We'll just accelerate that trend, which means that U. S.-based production and Middle East production is going to be even more competitive.
So that's going to Put, let's say, a booster effect on the fundamental demand for chemicals. It also means that The capacity that has come on stream will be utilized very well and we believe that it's going to mean also that production capacity is going to go further as you can see on the right hand side of this slide. So summing the supply demand picture up, We believe that demand is going to grow by a compound at around 4% per annum in the next couple of years. I wouldn't be surprised if you See a slightly higher growth in the second half of this year, but let's say for argument's sake 4% compounded over the next 2 to 3 years. And in the same period, supply is going to grow only by around 1%.
It depends a little bit also what happens in the product tanker market because we do have swing tonnage coming in and out, But with only a little bit of help from product tanker markets, we believe that supply could actually tighten. So that's why we argue that we are going to get into Sorry, where we may go above 90% utilization of the chemical tanker fleet and when we are historically, when we have been in that area, then it means you are in a high cycle. Odfjell is quite well positioned to take advantage of such a high cycle. On the left hand side, you can see the fleet renewal that we have done. This is only looking at the super segregators, not at the, let's say, commodity chemical tankers we have.
Between 2015 2021, we have increased that fleet with 50% from 22 to 33 ships. You can see we have some pool ships and some bareboat ships in that fleet, but we have been increasing our footprint in the, let's say, core tonnage segment. And at the same time, since 2018, we have been lowering the average age of the owned tonnage from 18 years to 14 years. So we've really been getting some new and effective assets into the fleet. In the middle side, you can middle slide middle graph on the slide, you can see the net contribution to Odfjell from our time charter fleet.
The average time charter fleet compared to 2016 actual time charter in rate compared to 2016 It's down 15%. So and that's on a comparative basis. So that means that the competitiveness of the Time charter fleet, if you wish, has improved quite a lot. It's a slightly smaller time charter fleet than we had. It's been reduced by 23% because we have also been replacing In terms of capital allocation, there are 3 things To note, first of all, on the CapEx, we have 0 CapEx needs in Odfjell Tankers in the foreseeable future and we have 0 capital injection needs into Odfjell Terminals and that means that It gives us quite good visibility on CapEx.
We don't have any immediate investment needs in tankers. And we do get the question on when are you going to start investing in new technology. And the answer I normally give is that we are going to do that when we're ready. There's quite a lot of things to Understand about new technology and Erik will talk about that in a little while in terms of how we see that picture. But from a capital perspective, CapEx perspective, we don't have any immediate investment needs.
And that means that the capital that we generate or the cash that we generate can go to 2 things. First of all, it will go to deleveraging. Thierry will go into much more detail about that, but we do have too much debt on our balance sheet, and we have a plan for how to reduce that debt, strengthen the balance sheet. And secondly, we want to establish a fixed dividend policy and start returning money to our shareholders. So those are the priorities in terms of capital allocation for Odfjell.
Carbon emission, ESG is on everyone's lips these days. It's a jungle out there in terms of understanding the regulations. And Every day you read the newspaper, you tend to get confused, at least I do, but there's quite a lot of rumors around there. It's difficult to see clearly. We believe we have Quite good overview and we have made very good progress.
But there's no doubt that the carbon emission is We need to be able to offer Transparency in terms of what is the CO2 footprint when you ship with Odfjell. And we also have to make sure that when we do provide services to our customers that we are competitive also in terms of the environmental footprint. And as I mentioned in the beginning, we believe that Australia has a market leadership position within CO2 emission. The graph you're looking at here on the right hand side is the EBDI measurement, which is actually a way to look only at the assets. It doesn't look it doesn't capture how you actually utilize the assets.
It looks at the assets themselves compared to the 2,008 baseline, which is also what IMO is going to be using. And as you can see, we have been improving 21% and the next in line operators are quite far behind us. I also want to say when you look at this, the 3 operators that are behind Odfjell are not who I would call our key competitors. So in terms of the competition situation for Odfjell compared to our key competitors, we are quite far ahead in terms of being We also offer the most energy efficient transport in the industry and that's a situation that's a position that we don't give up easily. We believe that Having the most energy efficient fleet is going to be a competitive advantage going forward.
That was my section. I'm going to hand it over to Jorgen, who's going to speak about towards 0 emissions?
Thank you, Christiana, and good morning, ladies and gentlemen. So for the next 40 minutes, I'm going to share with you some of our perspectives and thoughts on the energy transition for shipping from today's situation and until we get to 0 emission for both shipping and for Vodaf. I will try to be as concrete as possible in this presentation without going in too much into details. And the reason for that is, as I see often in these kind of presentations that they have a tendency to be a little bit fluid. And I think one of the reasons for this is basically that the regulation itself are fluid.
There are still first of all, it's quite complex material. Secondly, there are still clarities and uncertainties. And we are, as we speak, waiting for many decisions in IMO that will hopefully come out from the meeting that IMO has this week and next week. But I think it's important in such a landscape to try to simplify, and it basically boils down to 3 major milestones that we have to focus on. And the first one is in 2023 where we have to ensure that our ships, they have That reduced the consumption per transport work by 20% compared to a baseline in 2,008.
This is also referred to as the EEXI sorry, regulation. The 2nd milestone is in 2,030 where we have to reduce our Emissions transport worked by 40% for each vessel compared to a baseline in 2,008. What complicates 23rd a little bit We actually don't know that baseline yet. But as I mentioned earlier, I think we will have clarity on that within next week. And then it's the big one in 2,050 where shipping as sector has to reduce their emissions and the total emissions by 50% compared to 2,008.
And that means that we have to improve the carbon intensity between 70 90%. And as you have probably seen in the last couple of weeks in the papers, this has been or in the media, this has been heavily criticized by many stakeholders. But I think this is just a political statement from IMO because if you have a regulation saying 70% to 90% reductions, For all practical purposes, that is the same as we say at 0 emission. And so that is our focus for 2,050, and that is 0 emission. Before we move on, I just want to spend 1 minute on where we come from.
And Christian, he mentioned some of this already in his presentation. And I will not go through all of this. We have communicated this to the market earlier as well. But I think what's important here is to just highlight that you can do a lot with existing technologies. And this is a pathway that we have followed structured and methodically since 2007, we have an organization that is rigged to perform this work.
And it is basically the same concept that will successfully has got us wherever you are today that will also Successfully, Gattos Weibo should be in 2023, 2,030 and eventually 2,050. The results from what we have done so far, as I said, using existing technologies, focus on fleet renewal, combining operational and technical measures and other vessels, is that we have reduced our emissions per ton mile on the managed fleet by 30%. And I think the reason why we want to show this is that this means that the upcoming regulations and they are tough And but the point is that when we have this kind of starting point, I think this is something that we can utilize to our advantage definitely. So this is a good starting point, that's for sure. And then I think we need to clarify, who actually owns the emissions because it is the emission owner that is responsible to meet the reduction requirements by IMO.
And I think there is some misunderstandings on this out there. So I just want to make a long story very short And that is that this is regulated in Markkuil, which says that it is the holder of the so called DOC or document Compliance that is responsible for to get this done basically. And that means that For us, this means that the compliance to both 2023, 2030 and 2050 belongs to the ship manager and a bareboat charter. Indirectly, of course, this also means that the vessels that Odfjell owns is under our responsibility. So that means also that the vessels that we only operate, of course, it is our responsibility to have compliant vessels in the fleet.
But the compliance towards the iron ore regulation belongs to the manager and owner of those ships. So I think that's important to clarify in the beginning. Then in 2023, I just want to go a little bit more into the details. As I said, this is about 20% reduction. And this will in fact, we have 1 year ago, we mapped the situation for all the ships in the fleet.
And we see that 24 of our ships, they will be affected by this. So 58% of the fleet, we have to do something. What we see is that this is quite simple to do. This is going to be solved by something called engine power limitation, which means We reduced the maximum speed or maximum load on the engines on the vessels. So this is basically the same as putting a brick under accelerator pedal in your car.
So the power is there, but you can't use it. So this is something that we will do on 24 ships. As I mentioned, this is not complicated. It's not very costly, but it has to be done and we have to start early because this is going to hit all the vessels in the world. What's interesting is that the idea behind this regulation is, of course, to reduce the emissions from shipping the shipping sector through speed reductions.
But our analysis show that there will be no they will not be necessary with speed reduction for the oilfield ships. So we can comply with the regulations without affecting our tonne mile production. So that's important. What you see here on the slide It's basically our plan when we have to start the process in order to get compliant within the deadlines, which is starting in the 1st January 2023, and it will go further from there. This depends on the docking schedule of the ships, etcetera.
Then let's do some clarifications on the 2,030 regulation. This is about 40% in our existing fleet. So this is where this carbon intensity indicator comes in. And this is where it starts to get a little bit complicated because IMO, they are Still debating this. We hoped last couple of weeks ago that this was going to be landed in the intersessional meetings in IMO, but it wasn't.
So We follow the developments closely here, but it is difficult to see exactly how this will play out. But we know the overall ambition of a 40% reduction within 2,030. And that is what we plan for regardless of the discussions in IMO. So What will happen here is that basically is that the ships from 2023 until 2,030, they will get then a rating A to E depending on basically the performance of the ship or the emissions per tonne using the AER as an indicator. And then you will be plotted somewhere in this band.
And then it's Important now is that you have to achieve a rating of C, B or A in order to be compliant. But if you get a D rating, you have you can get a D rating 3 consecutive years before you have to approach flag state with a plan on how to get back into A, B or C. If your vessel is E rated, Then you have 1 you have to immediately, within 1 year, give this plan to how to get back to AB and C. So what we have done in Oakville is for the last or actually 1 year ago, we made vessel specific plans and we mapped the situation, of course, and we made That's the specific plans for the entire fleet. So we know exactly when we have to start on various improvement projects in order to manage this.
This is going to be tough, but I think we have a pretty good plan. But as I mentioned, there are still unclarities in IMO, so we have to revisit our plan, review it and maybe within Q3 this year, leaving us approximately 1 year of detailed planning before execution. And then I think we are starting on what's really interesting here, and that's about 0 emission in 2,050. And what's important here is that this will hit the new buildings that we will have somewhere down the road. This will probably not affect the existing fleet.
Although I believe that knowing the IMO processes, I would say that what we today know as a 2,050 regulation. After a revision in 2023, that is a scheduled year for revision of the IMO strategy. This can easily be 2,040. So I think that the chances are bigger that this will come earlier than later. But as I mentioned, this will affect our future ships.
And let's share with you now our thinking on this because there is, As Christian mentioned, a lot of information on this in the media. So I think this is a very important slide. I know it looks really busy, but We'll try to walk you through the highlights here. So what we try to do, we attack this from an analytical and practical point of view. And we have evaluated the various energy carriers or fuel types that can bring us to the or at least low carbon operations or 0 carbon operations.
And then we evaluate all these fuels on various fuel properties that are important for us. And the percentage figures that you see here, that is the percentage saying something about the increase or the reduction compared to if you were to do the same transport work as we do today on conventional fuels. So basically, this means that if you change to LPG and you want to do the exact same transport work as on VLSFO, you have to increase your fuel tank volumes by 40% in order to achieve that. So what's important now is I just want to share with you the highlights here from our analysis of this. And we can start with batteries.
And there are many people who still believe that batteries can be the solution even for deep sea shipping. And I think This figure here just tells us that that is a fairy tale because what this figure says is that we have to in order for to run 1 of our ships on batteries. We have to have 4 sister vessels behind it just to carry the battery package. So that is not a realistic option. And also to charge this battery package would require to do that within 10 hours, which is a typical bunker operation.
That will require full capacity from 6 Norwegian power plants. So batteries is not the solution for deep sea shipping. Then we see, especially in Norway, a lot of focus on hurdle again. And hurdle again comes in 2 forms. The compressed version that is the most simple version of Horegene or form of Horegene, again, you can see here what will happen with the volumes on board that we have to allocate to carry the fuel.
This figure shows that we have to allocate onefour of the vessels total volumes just for Karelia Epur. So that's not acceptable. But Hallwaggen also comes in liquid shape. And here, you can see that the volume increase It's still a lot, but it's starting to be acceptable. But what worries us is this one that in order to keep hard organic liquid, we have to cool it down to minus 2 3 degrees, which is almost 0 kelvin.
We can just imagine cost complexity, Not at least the energy required to keep Heiligen at this state. So the picture That is painted out there on Heiligen as future fuel for shipping. It's something that we just doesn't understand fully yet based on the figures that I've just shown. But what's interesting with HalloGen is that, that is basically the feedstock for a building block for almost all other alternative or 0 emission fuels. And that's the reason why we also support all hydrogen projects even though we don't Necessarily believe in it as a fuel for shipping itself.
One of these is, of course, ammonia. And if we look at liquid ammonia, You can see that the increase in tank volumes for carrying the fuel is starting to be quite acceptable. And we only have to cool it to minus 33 degrees to keep it liquid. And that is in that sense less complicated than for LNG. A lot of stories on ammonia, on the safety and all of that.
Of course, all fuels have Safety concerns, but we have not been able to identify technical hurdles that prevent us to do this safely. So we are quite interested in ammonia. We follow the developments very closely. But the problem with ammonia is that it simply isn't available for us, at least for the deep sea operators like us. But what is available and already out there is LNG.
And As you can see here, with LNG, there is not a solution for 2,050, but it can be a very good interim solution because it will provide us with tangible solid reductions along the way towards 0 emission. And the reason why we are focused on LNG is, first of all, that is also a sound business case. It's cheaper to consume LNG than conventional fuels today. But secondly, it's already available. The infrastructure is not good, but it is good enough to start this transition.
And I think when you look at the developments of LNG over the last 15 years, you get a proxy on how this will develop with other alternative fuels in the years to come. It has taken 15 years for LNG you get 400 ships on the water and an infrastructure which is still not very good. And I think that is very important to keep in mind when we discuss the future for shipping in terms of 0 emission fuels. These 0 emission fuels are not available at the pump today and it will take a long time before it is from our perspective. Then I just want to spend a couple of minutes on methanol and biofuels.
Here also, you can see that the emissions from the ship, this is from a tank to weight perspective, by the way, they are not any significant. But when it comes to these kind of products and also biofuel, we see that many ship owners, they opt for this solution. And we cannot rule it out, But there are things that we don't understand fully how come this is put forward as one of the alternatives towards 2,050. The reason for that is, of course, that all of this have to originate from bag oil. And there is a total production in the role of approximately 80,000,000 tonnes of bag oil.
If shipping is to transform into the use of biofuel as the predominant fuel for shipping. We will require 400, 500,000,000 tonnes per year. And we can just imagine the effects of that on the environment. And unfortunately, we don't have time to take that debate. It's full of TRN now, but at least we have some reservations on this.
Secondly, this is also an important point. Biofuels is actually not allowed to be used in engines today. This is regulated in the fuel codes and in Malmo. So the ships that consume this fuel today and we read about them in the papers from time to time, they have got flagged state approval case by case. And the reason for that, There are many reasons, but one of them is that you exceed the NOx requirements.
You're getting conflict with another GHG gas. And the problem is that you don't know that in advance. You have to test the fuel in advance, which also takes 2 to 3 weeks to get the answers to. So this is going to be quite complicated if this is the solution for shipping. So what I paint a picture of here is that there are many concerns to evaluate And there are pros and cons with all of these kind of fuels.
And I agree, I don't think there is any silver bullet there. That has been said many times in the papers. But I think we can rule out some of these, at least for deep sea shipping. But the complicating factor here, at least for us as a deep sea operator. It's the amount of bunker ports that we call.
And we have approximately 90 bunker ports that we get fueling today. And this is a picture showing where we have taken fuel the last 12 months. So we have done 1200 operations in 90 ports. And one thing is if you are a ferry operator, you can, of course, get infrastructure in port A and port B, but we can't do that with this picture. This adds to complexity.
And I think there is we have to be realistic here with when there will be global supply of 0 emission fuel. That will take quite some time. We had a meeting with 1 of the largest ammonia producers a couple of weeks ago. We asked them and we showed them this picture and we asked them when can you supply have a global supply of green ammonia? And they answered 2,035, 2,040.
And I think that's important. And that is the reason why I think LNG will have its role from now and at least 15 to 20 as said. I think all of what I've shown on last slides boils down to that there is huge uncertainty to which alternative fuel that will see the highest adoption and be commercially available in the long term. We see many ship owners, They argue on this, not only ship owners but also fuel producers and all the stakeholders and argue what is the best fuel, What will the next fuel be? And we think that that is risky to focus on try to identify the best fuel because ultimately, this is not something that we can control as a consumer.
This is controlled onshore by the infrastructure guys. So to do this and bet on methanol or bet on hurdle again or bet on ammonia is something that comes with a huge risk from our perspective. And also, as I mentioned in the last slide, I think it's important to realize that with our trade, we cannot commit to 0 emission operations from day 1, but we can commit to 0 emission capability. But anyway, with this uncertainty and the fact that We can't control the infrastructure part of the supply of alternative fuels and what that fuel will be. We have to have a different approach to this.
And our approach is to stop focusing that much on fuel and try to guess what the next fuel will be because we can't control that. But what we can control is what engine we put on the ships. And that is the solution from our perspective. That is the strategy, focus on picking the right engine, the right fuel tanks and the right few systems that connect us together. This is also quite a busy slide.
I just wanted to Show you the headlines. So basically, we have 4 alternatives. Batteries, I don't haven't included it in this slide because it's not realistic for deep sea vessels at all. Then we have the atomic or the molten salt reactors, a lot of focus on that is there. It's very interesting technology but not this is something that you just have to get a political solution to the use of it.
It's very interesting technology. I'm not saying we follow it closely. But what is more realistic for us is fuel cells and conventional combustion engines. And when it comes to the fuel cell technology, this comes in 2 subcategories, something called PAM and something called SOPS. The PAM fuel cells, that is They are fuel cells that are widely adopted in the world today and has been for many, many years.
This is on factories and all of the fuel cell cars going on hard again, They are having hand fuel cells. So it works. The problem with PAM is that if you believe in PAM and you want to get that in your ship, you also say that you believe in hydrogen and only Heilorin. So this is not acceptable technology for us because this will give us a higher risk that you select the wrong fuel. And all the things are as well, as I mentioned earlier, with the volume requirements, etcetera.
And that is why we are so focused on this fuel cell technology, SOX. As you can see, this has full fuel flexibility. And when I say full fuel flexibility, I really mean full fuel flexibility. It takes basically everything. But that is a good news that you have this few flexibility, which is to the core to our strategy.
But the bad news is that it doesn't exist yet. And that is the reason why we have embarked upon this project since 2018 together with Wartsila, ULTOTEC and Lundin Oil to get the world's 1st fuel flexible solar oxide fuel cell onboard 1 of our newest ships. This fuel cell is now being built And it will be tested at something called the Norwegian Catapult Center on the West Coast of Norway later this year. Then after successful testing, it will be mounted, Oglattrofitted on, as I mentioned, one of our new vessels, probably Bouhuron, after that. Now the beauty with this fuel cell is that, 1st of all, the fuel flexibility, as I mentioned.
But the second part is and this is the reason the main reason is that There are no moving parts in Fjord cell. We get the electricity available to us from the fuel, not through combustion but through a chemical process. That means that the energy loss is very, very small compared to a combustion engine. Actually, it is possible to reduce by 50% of your consumption on a fuel cell compared to a conventional combustion engine. And we must remember now, as we move forward now, there will always be 2 pathways that we have to follow, fuel flexibility pathway and 0 emission fuel.
But the second is whatever fuel it will be, we need to have the lowest consumption among all our competitors to remain our a current leadership position. This project, as you can see here, we will have a couple of fuel flexible tanks on deck. We have the fuel cellist containers here back here. And this is a 1.2 megawatt unit, which just equivalent of 1 auxiliary engines. Normally, our ships are equipped with either 2, 3 or 4 auxiliary engines.
So this is pilot. But our analysis show that 1.2 megawatt is enough for us to cover the entire energy demand in 80% of our port operations, meaning that we have the opportunity in 80% of our port operations to be 0 emission if we get, for instance, green ammonia. All right. But 1.2 megawatt, obviously, that is not the reason why we have gone into this project. We want to test it because the potential is huge.
This can be scaled up probably quite easily up to around 10 megawatts. And our analysis show that on the size of 3 auxiliary engines, we can cover the entire energy demand of the ship up to 10 megawatt. And that means that we can really do something about the design of our vessels because you get much more space available than we are used to. That can be used, for instance, for cargo, which again will drive up the tonne mile production offsetting the higher cost of fuel cell. So this is very interesting.
But as I said, we are in the project now. It will take some time. If this works as it should, it will still take time to commercialize, industrialize it and get this mass production out of this, driving the prices down. So this cannot be our plan A. Plan A is still to focus on internal combustion technology, but we have to think a little bit differently when we select engines than what we used to.
There are several technologies, sub technologies there for the combustion engine. Let's narrow it down to this one. And this is what we are looking for. This is the most fuel flexible engine out there and this is available. We can get this tomorrow.
So here you have a pretty decent fuel flexibility delivered from day 1 with Possibility to further retrofitting to, for instance, ammonia at a later stage. And we have completely mapped what this retrofit will actually mean. And we can say that we know exactly what parts we need to retrofit and this is about components on engine. This is not a very big retrofit. It is actually less It's a complex and derating engine, which we have done on many ships already.
So this is the engine that will derisk of investments moving forward from our perspective. But just as a closing remark, and I think this is also really important in today's environment. And that is to just I just want to share with you what does it actually take for us to go 0 emission. There are basically four things that must be in place. The first one is, of course, the technology.
And as I've tried to show in this From our perspective, the technology is already there, both in terms of fuel flexible tanks, fuel flexible engines and fuel flexible fuel systems. So that is already there. We can tick it off basically. But what is not ready yet is, 1st and foremost, the rules and the regulations for this. We need that in place.
We need IMO to agree on the carbon factors on the various fuels. A lot of discussion on that today. We also need to get from IMO should we calculate tank to wake emissions or well to wait because this determines the this is important to select the right fuel, of course. And then we also need class requirements, to be clear. None of this is really ready today, but we do not think this shows up a lot of focus on this, both in IMO but also in the class societies and within the flag states.
And we see also that getting approval in principle It shouldn't be any obstacle to us at least. But what is a huge challenge here is the infrastructure, which is bullet point number 3 here. We need 0 emission fuels and at least our main bunker ports, which is in the Rotterdam area, Houston, Singapore, Korea, Middle East, also we need a hub in South America. When that is in place, you have, for instance, green ammonia or whatever green fuel, Then we are starting to get close at least. But I think what is under communicated there is bullet point number 4 and that is the price.
Because let's say that we put our vessel underwater with pure flexibility and 0 emission capability. Rules and regulations are in place. And the ammonia green ammonia producers come to us and say, listen, the map you showed us a couple of years We can supply in all those boats. Then we can still not do this as long as the price is as it is today. All the alternative fuels are basically 3x as expensive as conventional fuel.
So as long as our competitors can sail next to us legally On today's fuel, paying onethree of what we have to pay, we simply can't do this. So what that is the reason why we are so vocal on getting in place This carbon tax or carbon levy that eliminates this price gap between the conventional, call it, black fuels and the greener alternatives, so 0 emission fuels. We need price parity between those 2 in order for the change to happen. And I think this is really, really important. And this must be global for a mechanism on and it must be regulated by IMO from our perspective.
And this must be in place until only the green appears are allowed. If this is not in place, My prediction is that this green shift will simply not happen before this is in place. So to summarize for the last couple of minutes, what it's we have tried to show you that the 2023 regulation is Not a big problem for us. We have full control on that one. The 2,030 regulation with the 40% reduction, we have a vessel specific plant for older ships that we manage.
But there are still some uncertainties in IMO with the regulations. So hopefully, much of that is clear next week, but we already know that some important issues will be done at a later session in IMO. But then we have focused most of this Presentation towards 0 emission. And as we also have seen, Odfjell has a very good starting point. We have the organization that is rigged for this, and we have a very good Plan and I would say a derisked strategy compared to many others.
What has been the main message here is that it's really, really difficult to pick a fuel that we believe in for next year. So as I probably already revealed in this presentation, personally, I believe LNG and Central Asia, Finland and Wiena Mone at a later stage, but nobody knows. Because this is not about technology, This is about infrastructure. And we simply don't control the infrastructure and the logistics on this. The challenge for us is, of course, that We need to make newbuilding decision at some stage.
And that must be taken when we don't know the full picture of what the next fuel will be. And you need to know something about that when you design a vessel. And our next vessel, whenever we build that, that will definitely sail into 2,050. As I mentioned earlier, Probably, this regulation will hit us earlier as well. So it's important for us that we have 0 emission capabilities already from the next vessel that we build.
What has also been important for me in this session has been to address that We really show you with some figures that deep sea differs greatly from short sea. There are alternatives that just simply cannot B alternatives for us, REF, hydro, and battery because of the distances that we said. And that is the reason why we believe in fuel flexibility. That is the key here. That is the what will derisk our investments and it will leave most doors open for us.
So we have maneuverability as the picture gets a little bit clearer in the years to come. And we follow 2 pathways here. We have the fuel flex solar oxide fuel cell pathway. And we also follow closely fuel flex combustion engine pathway. And I think it's important also to emphasize that, again, we have 2 pathways on.
That is, course, you get 0 emission capability, but the second one is to have as low consumption as possible of whatever fuel there would be. So thank you for your attention. And I think I will leave the floor and the mic to our CFO, Tarje Erosen. Thank you.
Thank you, Erik, and good morning to all of you. I will, in today's presentation, focus on what Christian talked a about in his kind of statement in the beginning, how we are going to kind of Derisk the long term, we are going to strengthen our balance sheet to reduce the leverage and also to then reduce the cost of capital and then paving way for increased free cash flow to the equity. So I've divided my presentation into Some sections here. We'll start with a short recap of the financial development, the last few years. Dan will go more into the details how we have refinanced on how we have worked with our debt portfolio the last 12 months.
Then I will take a recap of the financing initiatives We have done as a part of that to reduce the cash breakeven and the outcome of that so far. Before I go into what how are we thinking going forward, we got to further deleveraging and further then reduce the cash breakeven and also indicate what kind of initiatives that we are currently looking into. And then I will then go into how that can turn free cash flow development, increased free cash flow from debt after debt service and also free cash flow to equity and then how that ties into the final strategy at the end of the presentation. So if I start then with the financial development, the last couple of years, this is a longer term picture. But Looking at the last few years, we see that the EBITDA generated from our business has increased by substantially actually since the market bottomed out in 2018.
Both the EBITDA from the chemical tanker business but also from the tank terminal business. Even though we have a smaller plot when it comes to terminal business We had a few years ago. We see increased EBITDA generation from that business. Looking at the balance sheet, we see that the equity ratio is quite unchanged actually in the last few years. That, of course, has to do with the net results that we have delivered not being sustainable over the long term.
At the same time, we have increased the total assets on our balance sheet with all the newbuildings and acquisitions we have done, which is also done putting kind of a weight on the equity ratio. And that is also reflected by the loan to value when it comes to the leverage on our vessels compared to market values, which has increased slightly in the last couple of years to 65%, which is somewhat above our target to be within 50% to 60% loan to value for our vessels. The same goes with equity ratio. We have a long term objective to be within 30% to 40% equity ratio, and of course, we are in the lower range that target. When it comes to the cash breakeven, we can see that over the longer term, we have reduced that quite much actually since a few years back.
And we have also but we are still not where our targets are when it comes to the cash breakeven long term that we are targeting being between $18,000 to $90,500 per day, which should enable us to be cash positive throughout the market cycles when it comes to time charter earnings that we historically have generated. And of course, looking at the return on capital employed and return on equity, we have seen increase the last few years as we have also seen the results improve. If you go more into the details about the debt development the last couple of years, especially done since end of 4Q 'eighteen. We see that we have totally increased the debt. That is mostly associated to the fact that they have taken a lot of deliveries, new vessels, meaning that they added around US300 $1,000,000 new debts for the new vessels.
At the same time, we have reduced kind of the existing debt of order debts with around USD160 1,000,000 in the same period, and that we have done despite the challenging market that we have seen. Looking back kind of the beginning of the pandemic last year, we did That adds some depth to the new billing that was delivered at that stage. We also did some contingency driven initiatives to build liquidity reserves to kind of be able to go come through the pandemic. So that also led to an increase in the debt during those the 2 first quarters in 2020. Since that, we have also included a full depth for oil and gas vessels when we did the acquisition of the 50% outstanding shares in oil and gas.
That is also adding increased debt to the total balance sheet. But since that, we have also then started to kind of continue our path to deliver our balance sheet. We We've done a few refinancing this year already, which have then reduced the total debt in the company. This we have done also when we are building liquidity reserves throughout the COVID-nineteen with around $50,000,000 in increased liquidity. On the bond side, we have done to refinancing the last year, but we also have then reduced the total bond debt to be around $11,500,000 What about our cash breakeven?
As I said, we had a target to reduce that to around $18,000 to $90,500 per day, meaning that we had to decrease the total cash breakeven for our vessels with around USD 3000 to USD 4000 per day. And by cash breakeven, I mean the time chart I needed to cover on OpEx, G and A, interest, debt amortization and also kind of running CapEx on our fleet. So far, we have achieved around USD 7.75 per day of that target. So we are not there yet. Of course, there are several reasons for that.
And looking at the various elements here, we see that Secured and mortise debt, we have a target to be within the range of $500,000,000 to $650,000,000 We are close to $1,000,000,000 today and that is, of course, tied into the In fact, we have seen new billings being delivered, and that has increased the total debt. But even though we have been able to secure some lower interest, leading to some savings and some reduction in the cash breakeven per day. Non amortization debt, which is our bond debt and secured bonds. We have a target to be within 200, 250. Based on where we are in the cycle, we are in the higher range there.
But as I mentioned, we have slightly reduced the total bond debt, reducing also running interest on the bond loss. And then on extending and averaging the amortization profiles for our vessels, although the $3,000 to $4,000 in target, dollars 2,000 of debt was tied to Our plans to extend the amortization profiles for the loans, existing loans and also when we do the refinancing of the various loans. So far, we have achieved a $4.15 per day in reduced cash breakeven. We have stretched The profile for several loans where we have profiles now extending to 20 25 years. But at At the same time, it's also a consideration if you want to stretch the profile too much according to the bank's slide deck that comes with a margin.
So it's a balancing whether we should extend it to the maximum or whether we should go for a slightly lower margin on the loan. And then on encumbered assets, including Andronovo, we have around $70,000,000 close to our target. And then as I said, summarizing the debt is on the high side compared to our targets. So we still need to reduce the debt going forward to achieve our targets. And even though $6.75 per day doesn't seem that much, If you add up to the number of selling days for the IPO around $60,000,000 in kind of savings or reduced cash outlay on the debt service going forward.
So it's really a material amount anyway. This is showing what we have done on the debt and all the costs on the debt test developed the last 3 years. We see that the bank loans, we have seen a small decrease in the margin so far this year, but it's quite stable to where it's been for a long time. We still see good appetite amongst the banks to compete for financing for Kjell. I think we are considered as kind of blue chip companies within the shipping sector, meaning that Most of the shipping banks that are active in the market that want to be a part of the loan portfolio or lenders to OPL.
On the financial leases, we see quite a good decrease in the margins we are paying on our leases. That It's related to some refinancing we did earlier this year. We are now below 3% margin in total on the financial leases. So we are going in the right direction. Even though we see that, of course, the bank margins are traditionally lower, but that is also attached to the fact that the financial leases have a higher loan to value than the traditional bank loans.
Also on the time chart on the bareboats, looking at the Capital cost for this, that is also on the right direction, going slightly down from year to year. And then on the bonds, That is also quite stable even though we see improved terms for financial leases and the banks. Still kind of expect the bond market to really Appreciate the Odfjell credit and hope to see reduced margin there going forward. But of course, it's up to the market to decide what margins we obtain. And then we are left with the kind of the cost of equity being, of course, our main challenge and have been that for some time.
The shares priced the price book around 45%, meaning that it's difficult for us to use the equity of our shares as kind of equity or kind of currency in the market. If you look at the values and look at the broker indicate the values end of last year. Sum that up, we have a market value of fleet around US1 $581,000,000 including the debt on those vessels of $977,000,000 We have a net asset fleet value of $600,000,000 around $600,000,000 and a loan to value per end of May at around 62%. If you add the book value on the terminals without saying anything about the estimated market value And also add corporate debt, we have a total equity around $569,000,000 compared to market cap excluding our net over treasury shares at to $61,000,000 Of course, 45% book price book is not satisfactory, but again, it's the market to decide. And also looking at the net assets value when we include the broker indications, you have even the net asset value above the total booked equity at the US628 million dollars So what to do about that going forward to reduce the cost of equity?
It's not straightforward, of course. We need to see increased earnings. I think we have to continue with our measures to reduce the cash breakeven and further refine our capital structure to see that kind of The pricing of the share is closer to the net assets value on our balance sheet. If you look at the debt maturities going forward, this shows that it's quite limited actually what is maturing of debt in the coming quarters and the coming years. We have quite limited balloons maturing.
We have a few this in the Q4 this year and also in the Q2 2022. Six loans in total, $30,000,000 but that is totally manageable. Then we have a bond maturing in June, I think, in the Q2 2022. We think that is also highly manageable. And we will, based, of course, based on the earnings, based on our kind of a contingent plan or plan to reduce the debt going forward.
We will consider whether we should refinance that, whether we should due to have issues on the existing bonds or whether we should replace the bond with kind of cash on our balance sheet or lower yielding external debts. So that is one of our tools that we can look into going forward. But this is a quite comfortable picture for us with quite limited refinancing needs and also kind of looked together with our CapEx plans, which is close to 0 for the coming years. That paves the way for us to continue our plan to reduce cash breakeven and reduce the leverage on our balance sheet. Here we show a picture of kind of some of the tools that we think we have in our toolbox today and are considering to use going forward.
This is not the kind of we haven't done any made any decisions on what kind of targets or any of these measures we are going to embark on, but these are kind of we are listening to be transparent on what are we considering and what are the tools we think we have available going forward to reduce the cash breakeven and reduce the leverage. Of course, we have Warwick credit facilities which we can repay on that will reduce the capital cost going forward. We also have the maturing loans that I mentioned that totaled CHF 30,000,000 maturing in the next 12 months. We could repay those earlier. That could free up around USD740,000,000 of annual savings in decreased capital cost.
We also have several vessels on leases today. As I mentioned, the lease cost is higher than on the bank loans. For example, we have 9 vessels, quite new vessels that are financed by quite high long term value structure, which also, of course, comes with an increased margin compared to a lower leverage on those vessels. We think we could by only kind of reducing the leverage on those vessels from around 70 5% to 65%, which is more kind of bankable terms, so to say. We could then have a reduction in debt around 25,000,000 to USD50 1,000,000 a year, which going forward could reduce our cash service with around USD612 1,000,000 reduced to cash breakeven for those vessels with around $3,650 per day.
We are also considering to combine some selected vessels. Some of them are on leases today and some are on banks traditional bank financing. We could do that in a kind of a cash neutral transaction, just extending the loan profiles and hopefully also reduce the margin on those structures, which in principle will be cash neutral, but in the longer term, should we reduce our That service around USD 5,700,000 or close to USD 5,500 per day for those vessels involved. And then as I mentioned, the bond that is maturing going forward, of course, is also a good opportunity for us to take down the cost of capital, just repaying those loans at maturity or kind of potentially replace them with lower yielding debts. This is showing kind of how we gradually improve our cash flow, free cash flow to equity and hold that hopefully in the way in the end should pay away for sustainable dividend policy, which is more linked to OVONIX.
As I said, if we are able to reduce to come close to our targets on a cash breakeven. We should be able to deliver positive cash flow to equity throughout the cycles. So far, looking at the left side of this slide, we have achieved already reduction in cash per gain on around USD 16,000,000 on an annual basis. The initiatives that we just showed you that could summarize up to $70,000,000 if you embark on that in total and $33,000,000 increased free cash flow to equity. Daniel, on the terminal side, there are some dividend stream coming up from our terminals in Antwerp and also Korea.
We have some proceeds from the sale of Dalian last year, which is still within the joint venture within the terminals that could be freed up. In addition, we have the terminals in U. S. In 2024, which is kind of this picture is showing, we don't expect or haven't planned for any dividend from the terminals in the U. S.
But going forward, we think there are also dividend capacity baked in the existing credit facility for those terminals. And also based on the A 16 CapEx plan, that should be possible to expect some dividend for the coming years. But we are not including any figures, sir, because That will depend on the CapEx plan on how fast we embark on those. And then to the right on this slide, we show that, of course, Increasing the earnings from our vessels will certainly increase the free cash flow to equity. If you are able to increase that from kind of average time charter rates in 2020 around $21,000 per day.
If we increase that to $22,000 per day, that should free up and we are above kind of to increase decreasing our breakeven levels. That should add $17,000,000 And for each $1,000 an increase a time charter thing per day, that should add 24 additional 1,000,000,000 to the free cash flow to equity. Then a few words on what we have done on the sustainable linked financing, the last year. Last year, we prepared this framework for sustainable financing, and we did, As many of you know, an issue a bond issue in January this year where we were the 1st shipping company worldwide to issue a sustainable link bond or also the 1st a company within the Nordics to issue a sustainable link bond. That framework we also use now for several bank loans.
This is something also well received by the banks and the investors in general. So we have now around 17% of our total interest bearing debt linked to that sustainability linked financial framework. There are some pricing effects. If you are able to it's going to deliver on the fleet transition plan for our ambition to reduce the carbon emission from 50% by 10 30%. But that is quite modest, that direct pricing effect, but we think that we see a considerable indirect effect, meaning that investors are kind of more attracted to financing Odfjell, especially the banks.
We see more competition. I think we are seeing lower margin because of This financing program being linked to the oil plants to reduce the carbon emission for our fleet. The sustainable financing market is fast evolving, we think. We are in the lead there and going to continue with that and tied into what Erik talked about a lot about when the kind of new investments at the stage coming out that will be, we think, quite green investments. So it will be natural for us in the next term to maybe look into combination of sustainable linked financing and also a green financing structure.
If I can summarize, we think we're on a good path with our strategy to reduce the cash breakeven and to reduce that sustainable and dividend generating levels. As we have said, we have ended our new billing program that makes makes us in good position to accelerate our deleveraging ambitions. Also, we have reduced our breakeven level quite substantially already, but There's more to be done, but we have a tool chest. We have various options that we are looking into to further reduce that. And that should lead on to gradually improved Free cash to equity, both through debt leveraging initiatives but also potential when it comes to the earnings going forward.
And as I mentioned, we think we have established quite a proven platform for sustainable financing that we are going to develop going forward. So as a summary, this ties well into our final strategy to have access to attractive capital resources. The Comenet operational strategy when it to the kind of how we want to finance our core fleet. Now we are financing kind of more of the fleet, more commoditized fleets through the time charter and bareboat market and also by buttons. And ensure that we have a competitive cost of capital as a company compared to our competitors.
Then we want to secure that we have the flexibility to secure further growth and kind of utilize opportunities in the market and, of course, then to manage risk, which I think we showed quite good in the pandemic breakouts last year when we had and contingency plans. And we also prepared a bridge funds in case of the bond market closed. But we did a new issue and we succeeded with that, and we think we have the necessary flexibility going forward to manage what risks should come up in the market. And then in the end, of course, to be able to deliver attractive returns to our shareholders. So that was the end of my presentation.
And then I will leave the vote to Jan Hammar, Head of Global Tanker Trading in Odfjell. Thank you.
Thank you, Thalia, and good morning, everyone. I will now move on to talk about Orfjell in a stronger chemical tanker cycle. First, taking you through our market outlook before moving on to look at how we are positioned to capture a stronger market. So if we start by looking at how we foresee the chemical tanker market will develop in the next years, there is no doubt that we believe The underlying drivers are in place for a stronger chemical tanker cycle. As Christian was saying, we are seeing that the end user demand for chemicals have coked well during the pandemic in many of our key markets are back to pre COVID levels.
And secondly, fleet growth remain under control, and we believe that the influx of swing tonnage into our markets have peaked and that will contract over the coming months. But first, what pieces are missing and needs to be in place in order for the chemical tankers to become fully functioning again. There is no doubt that the chemical tanker market is currently very challenging. Although many of our key markets have recovered well after the pandemic, there are still a number of markets that are not functioning. This can very easily be traced back to the COVID situation and lockdowns respective end user markets.
And as you can see from the map here, with all the blue lines, this is how we trade our ships. And we trade all around the world with very little ballast. This means that we are depending on all key markets to get attractive roundtrip economics. And the result is that every time we see an increase in lockdowns, Our economics are immediately challenged. We do believe that the rest is behind us and the European markets have started to recover already, and we see that the increase in chemical imports Followed very quickly.
So India, South America and to some extent, Southeast Asia are currently the remaining process that needs to be resolved before we see a healthy market again. And at that point, we do believe that it will all become very functional. Going back to supply, If we look at what has historically been the main reasons and drivers of fluctuations in our markets, it is clear that the real drivers is not demand, But it is really the supply that has been the challenge. So there are 3 important factors to look at in order to understand what supply will look like in the future. We start by swing tonnage.
We're seeing that there are a negative pressure on the rates in the AML tankers that has forced a lot of IMO 2 capable AMLs into the chemical tanker market. And As we're seeing from the chart to the left, the very strong momentum in the clean market we saw back in spring of last We have pushed a lot of the CPP ships back into the natural market. But as that market has softened over the second half Last year and the beginning of this year, there's been a gradual reversal. And currently, there are about 10% of the available AMR capacity trading in chemicals compared to the historical average. However, as we see post pandemic and expect ability to increase, we expect the AML markets to firm up and that will push And back into the natural environment.
And at that point, you will see the influx of amortonage reversing back to the historical average. If we move on to the order book, we see that the order book size and percentage of the current fleet is at a historical low. This very low activity in the chemical renewable market is coming as consequence of a number of reasons. 1st and foremost, we have a technology risk or the risk or challenges in selecting a propulsion system. And although we are starting to see technology available in the market that could make us for a 25 year lifetime and referring back to what Erik was saying, This is not yet fully adapted in the market.
And we are seeing an increase in interest in all the dual fuel LNG ships and other shipping segments. However, As this will not give a full 25 year lifetime horizon, I mean, it's also a rather significant capital investment with little operational benefit. Certainly, in the worldwide chemical trading, The uptake within the chemical tanker fleet has been very, very limited. Another important factor, and I was holding on the new billing In the chemical shipping is that there was a lot of holdouts in other segments, which has driven the prices up. And that, in combination with steel price High steel prices makes us believe that there's going to be limited of new billing activity.
Still, there are some Japanese yields that is actively seeking new orders, there's a lot of challenge there relating to Tier 2 versus Tier 3 designs and are currently, at least not easily available Japanese off the shelf designs ready for order. And the last important factor to look at is the age profile and or the age distribution. The chart on the right may not look very dramatic, but if you look more closely into the figures and we look at that 6 0.1% of the fleet, that is over 25 years by 2023. That was an overrepresentation of the specialty tonnage. And also, in that segment of tankers that have become older than 20 years in 2023, we see the first wave of Japanese built tonnage.
And this is ties up. It was not initially built to last as strong as 25 years. So we see a lot of these ships are being sold off to secondary markets to trade such things as fuel oil. Another important factor to look at in order to The dynamics in our markets is the market consolidation. While we, in the beginning of the last decade, saw a deconsolidation with a lot of new entrants, largely fueled by equity money.
We have now, during the last couple of years, seen consolidation increasing.
And as there
are still a lot of financial investors seeking And actively seek actively marketing our feeds for sale, we do believe that there are more consolidations in the pipeline. And while the consolidation in itself has a relatively limited effect on the spot market due to the continued significant fragmentation, as we can see to the left of this chart, It does have a meaningful positive impact on the COA market. And as you can see at the right in the top, the recent consolidation is Basically, facing ourselves together with Amwal and Stolt in a position of our own. And certainly, when it comes to catering for the more global sea waves with high sailing frequencies and long haul trades. So the summerfall is that after many years in the dendrons, we believe in a stronger chemical market that will change the dynamics In our favor.
We expect improved smock market dynamics as we see a recovery in key markets post pandemic, bringing the global tanker market back to the positive trajectory we saw prior to COVID. And the supply outlook remains well under control with reduced Presence of sphing tonnage and an aging fleet that is not renewed as newbuilding activity remains low. In return, this improved spot market will reduce owners' Building us to proceed COA volumes and the ongoing consolidation of less fragmented market will give us more negotiating power and together with the reduction of Capable tonnage available in the high end COE market. And I will move on to talk more about how we are uniquely positioned to capture the upside in the market. The Orfel Tankers trading platform It's designed to give full flexibility to the upside and at the same time, limit downside.
We are truly a global Chemical tanker operator with presence in all major deep sea trades, and we also have people on the ground in all of the major chemical tanker markets. We have a well diversified contract portfolio that today counts more than 90 different COAs, giving us a contract coverage of about 55%. It's also well diversified in the sense that it covers a lot of different geographical areas and also product groups, and that makes us less exposed to Disruptions both in trade flows and also in specific end user markets. In addition, we have an organization that Has a solid understanding of both the COA markets and also of the spot market. This enables us to maintain a high utilization on our fleet even as COA volumes fluctuate, and it also enables us to take advantage of a stronger spot market.
And lastly, we have a very versatile fleet That is very interchangeable and capable of carrying anything from high end specialty chemical programs to CPP programs. If you look at the different markets we operate, we can divide that into 4 different markets. These are specialty chemicals, easy chemicals, vegetable oils and CPP. And these markets have all different characteristics and different market outlook. Specialty chemicals is characterized by high barriers to entry and a high COA coverage.
And despite being a mature market with limited growth, there is an upside Potential in this market as we see continued benefit from market consolidation and also the structural decline in capable stainless steel tonnage. In the EC Chemicals segment, the barriers to entry are lower and the market is more fragrant and leading to more spot activity. Still, there is some COA activity, obviously, but it's lesser than compared to the specialty chemicals. This is also a very fast growing market driven by structural shift in the chemical industry. And the potential upside we see here is further fueled by the fact that we expect a reduction in competition from swing tonnage.
West of Loyce has low barriers to entry and is mainly spot driven, and it's considered a mature market. However, as we see an increase Growth in biofuels in the coming years, that will affect the demand in this segment. And also, this is a less attractive Segment for CPP owners as the CPP market strengthened, and this has mainly to do with the fact that there are lost cargo restrictions and lower cleaning requirements that will be challenging. And lastly, the CPP market, which is challenged by low barriers to entry and high fragmentation. Going back to the point that we made earlier about this Market, we do expect an improvement here and through the second half of this year as inventory destocking is coming to an end.
So how are we positioned to best capture the upside in these different markets? Having completed the most extensive renewal program In the company's history, we now have the most modern fleet within our core markets, leaving us with a lower unit cost through fuel consumption reduced fuel consumption and increased capacity. Since 2017, we've done a number of transactions. First, we took over the 5 CTG vessels And from Eirik Dinghang, and later on in 2018, we went on to take 4 new buildings and another 4 similar ships, This is the ships in pool through the Sinochem transaction. In 2019 and in 2020, we took delivery of both, four Advanced chemical tank large chemical tankers from yards in Japan in combination with our own specialty newbuilding order of 6 new ships from Hudon.
And we are not yet done. We have also 4 new 25,000 tonnes being delivered to us during 202220 23. So that gives us the most competitive fleet of all in this segment. In addition, we are uniquely positioned to capture the growth and opportunities within Easy Chemicals, Vegetable Oils and CPP with our larger coated fleet. Through a newly established pool, we now control 21 coated vessels.
And this is important to say, this is in addition to and not instead of our core tonnage as it complements our large fleet of stainless steel tonnage and improves our commercial capabilities. Also, with reference back to the market outlook for the various segments and position us well to the expected change in the global energy and petrochemical markets. And finally, a sizable fleet of coated tonnage will enhance our service to our customers and to the requirements. And as a result, we today operate the largest and most flexible deep sea fleet in our industry. We normally divide our fleet into 5 different categories, which are super segregators, large stainless steel, medium stainless steel, regional and coated vessels.
And although none of these ships or none of these vessel classes, I should say, are fully optimized for all four segments, it provides us with a high degree of flexibility and interchangeability Also across vessel classes, which enables us to capture opportunities within the different market segments. So in conclusion, our platform is well positioned to capture the market upside in the years to come. We believe in a positive market Outlook as demand is expected to recover post COVID and supply outlook remains under control. We have a strong trading platform designed to give us full flexibility to capture the upside and by at the same time, limiting the downside. We have the most competitive specialty tonnage, giving us the low cost through Reduced food consumption and increased cubic meter.
And we have a unique split of stainless steel and coated vessels, enables us to capture the upside and opportunities in EC Chemicals, Vegetable Oids and CPP. So with that, I will give the world back to Christian for some final remarks.
Thank you, Bjorn. In terms of I just want to say before my Please post your questions and we will take them afterwards. There are some quite detailed questions by Erik that I hope he will answer. But we will take any questions that you might have now and of course, you can also contact us after the presentation. The very short summary today Is in terms of COVID-nineteen, we have been focusing on operations, operations, operations.
We believe that the Odfjell platform has passed that test And because we have also while we have operated well and efficiently throughout COVID-nineteen, we have also accomplished a number of strategic things at the same time. In terms of the short term outlook, I think we have argued strongly and also probably more strongly than we usually do that we believe that we are Entering an upturn in the chemical tanker market. There are, of course, uncertainties when we say that if there is a correction to the world economy and so on, But in terms of fundamental demand for the products that we transport and the distances that we transport them, that is quite strong And the supply picture is quite fixed for the next 2 to 3 years. And what happens after that, we will see. We think we are well positioned Take advantage of the upturn.
We are not bidding the farm. We are not going full spot type strategy in terms of tactics. We believe that it makes sense to have Capacity available when the market is coming, but as I said, we're not betting the farm on that. In terms of the long term, it's very much about how we engage in the energy Transition, what will happen to the markets will also depend on how quickly new supply will be coming in. And our focus has been It will be to derisk that future and not expose ourselves a lot to or reduce the exposure to conventional Technology, while we understand and invest in technology when that time comes.
Today, we have not spoken a lot about terminals. We have focused on the tanker side. There's a lot of things happening that are of interest. The very short version, as I gave Initially, we have been going backwards on terminals for a couple of years now. That means that today we stand on a smaller but much more attractive in terms of terminals, but we need to figure out a way how to grow that terminal.
Our fundamental principle for that is that the terminal should Fund themselves. So as we have said, in terms of capital allocation, we don't foresee any immediate need to inject capital, but we do have to find a way to grow the terminals. And You will hear more about that in the coming quarters. So that I think was the end of the presentation. I want to again thank you for taking your time to listen to this, whether you're listening live or you're seeing this, watching this afterwards.
We will take the questions now. And then if you did not have a chance to ask that question or you're watching it offline, you are welcome to contact any one of us and we're happy to take the questions that you may have. So you want to take the questions? Yes, we do. We
have a couple of questions here. They are going to be addressed by several of the speakers, I guess. You can decide between the 4 of you. The first question is from Peter Haugen and Kepler Cheuvreux. Highly interesting presentation by Mr.
Joklaan. Thank you. And then this is divided into a couple of questions here. Number 1, about the ongoing MEPC 76. As you said about your fleet, the proposed regulations does not really imply any need of change.
Do you expect any material change in the Change in the 2023, 2025 from the EXIC II regulation in any part of the global shipping fleet.
Okay, thank you. It's a good question. So what I said about our fleet is basically that The EXI regulation from 2023, of course, it will affect us, but it will not affect the speed of our fleet as it looks now. When it comes to the CII regulation, which starts from 2023 until 2,030, this is the 40% target. That will, of course, affect us, and we need to do many initiatives on many of the vessels in order to achieve it.
And then the second question from Petter. Is it possible with reasonable costs to design a fuel supply system, which starts with LNG and converts into NH3 when available. Or is a new supply system required when transforming LNG to NH3?
You need a different kind of supplier system if you want to retrofit this. But what is available today is the engine that I mentioned in my in Asia. That is basically available as it is today where you can start with LNG. And then I would say that the plan will be to have already ammonia ready tanks at from the very beginning And then later, we do some changes to the fuel systems, but the most changes are on the engine itself. But as I mentioned also, the changes or adaptations.
They are not significant actually.
And the third question from Peter again. Could you share some concrete numbers on cost differences between ICE versus FC, both on CapEx and OpEx.
That is really, really difficult to answer. What we know is that the fuel cells are more expensive than a combustion engine. And we can, of course, get prices on the PEM fuel cells, which I mentioned earlier is the one that is mostly used today or is the predominant fuel cell technology, but that is not relevant for us. But the SOPS fuel cell. But as I mentioned, that actually doesn't exist.
So we know the cost for our projects, the cost are high, but that is not representative for the cost when this is industrialized and commercialized. So it's actually premature to say what the prices of the soft Sure sell will be.
Thank you. And then one question here from in Arctic. It could be answered by both Christian and Bjorn. What would you say is the biggest hurdle for the segment to succeed in getting sustainable contract rates? Yes.
I think perhaps the biggest challenge in order to get the rates and the contracts also is we need an improved spot market. As I was saying in the presentation, as we see the spot market improve, that will ultimately also improve the dynamics in the COA market. We do believe that as also, we see a reduction in many of the more advanced contract and The ships that are in that market and capable of doing those contracts as they become older and there's a reduced supply of those, we will see an improved dynamics. But I think the most important factor is we need to see and improved spot market.
Thank you. And then a question to Thijs. What is your strategy when it comes to refinancing or financing in general using sustainability linked bonds or debts.
As I briefly touched upon in my presentation, we issued this bond in January using the framework that we established last year. We have already this year done several refinancing with banks, external banks. So already kind of the For our total loan portfolio, 17% is linked to our sustainable linked finance framework. Going forward, We have a leading position with ESG as a company, and I think we want to maintain that, and we will do that. And then it's natural for us also to kind of develop the sustainable linked financing framework for us.
We continue to do issuances under that framework or kind of a developed framework. And also, as mentioned, it could also be a combination with green financing in the future, depending on what kind of investments we are going to finance.
Thank you. And then from Lars Bastennerstern in Arctic Securities. Ordering new bills against fixed commitments from instead of speculative orders. Is this something you see as an opportunity in the future for Odfel or the segments considering the high risk related to ordering over the next years?
Well, I that's partly a philosophical question, I guess, but I don't see that really. I think Building ships for dedicated trades for customers is, in effect, the interest rate cost of capital gain. That's just not our business. We operate, let's say, a liner type system. So when we invest in new ships, we invest in the Odfjell say, system, our ability to deliver services to many customers.
So I don't think that we will be Pursuing kind of purpose built tonnage. If there is special designs required for special trade against certain contract for some part, Will we be able to adapt new orders to that perhaps? But in general, we are investing in the total system in Odfjell. So I
think we I I don't think
that what you're suggesting is an option.
And then one follow-up from Lars Bastian in Arctic. There are now a lot of initiatives and committees related to all the emission problems in shipping. Do you think the industry is on the right path to solve the issue with that many parties and committees involved?
Yes, I think we should just welcome all initiatives out there. The more we discuss this and share ideas and Kind of agree on the way forward about the release. So I don't see any conflict there. Having that said, I think we try to limit our exposure and our participation To what really matters to us.
And then from Lars in Arctic again. With the fuel cell project approaching an end, and if this is commercialized, How would the process continue from there to make that happen?
Yes. First of all, autolist has been installed. It will be tested for approximately 1 year on our vessel before we make any conclusions. And after that, it's, of course, a discussion how to take it from there, but this is about scale. And that's basically everything we can say about that at this point in time.
And then from David Bate in SEB. On your comments of going into 90% level utilization market and a higher rate environment, How are your customers reacting to this outlook when freight costs go higher?
Well, they're not reacting yet Because as Bjorn has pointed out, the markets are not as strong as we believe that the fundamentals will favor. But I do think that the customers Are beginning to see that a tightening in supply and the supply of ships that can transport their goods in an Environmentally friendly way is beginning to be an issue. And when the supply is tight and demand is high, then rates will go up. I think if you look at The profitability and the sales for many of the chemical producers and you also look at the profitability per tonne, let's say the margins, Let's say a 10% increase in freight will not have a significant impact on their bottom line. I think it's supply security and the other things that count.
So of course, like any rate increase, there will probably be some negotiations going on, but I think Most people that I speak to see that there's a tightening in balance and then we will see how far that goes.
Thank you.
And then from Raj Bastan in Arctic Securities. How would a scenario where crude and CPP markets remain depressed impact your chemical tanker market thesis?
I think what we saw in the Q2 of 2020 and also the Q3, I guess, is that when the CPP markets take off, It has an impact on our markets. The swings on this disappears and that's just a general tightness and so of course it will have an impact. It's very difficult to answer if the CPP market stay at, let's say, dollars 10,000 per day for an MRR, what exact impact will But I think as Bjorn showed you, there is a tightness in the specialty tonnage whether no matter what the CPP markets do. So to think that it's going to have a lasting very negative effect on us that the CPP markets are very low, I don't think it's That's the case. But it will, of course, affect the general mood and our ability maybe to have backhaul contracts and so on.
Yes. And then from Max B in DME, what is the latest on strategic decisions for the Houston terminal? Should we pencil in long term negative effects from the freeze or the fire. No external CapEx requirement, so it remains self funded.
The strategic decision for the Houston terminal, I think our plan is still the same that we have unused The capacity within the land that we haven't used and that we want to build out, we have a green let's say, greenfield A piece of land that we refer to as the point, we want to build that out. But of course, the big freeze and the fire we had will delay that. But I don't think that it has changed the plan. It has basically just delayed it. So we're following the plan with some modifications to the timeline.
No what was the question in terms of no external CapEx requirement, so it remains self funded there. I can confirm That's the way it's. We don't expect we need to, as it is today, inject capital into the terminal user.
Thank you. And then from Anders in Danske Bank Markets. In terms of achieving the cash breakeven target, what is the Time line that you are looking at? I
think we have earlier expressed that our target is to reach that ambition end of 2023, and we think that is still likely to achieve. We have kind of come a long way already and also with initiatives that we have kind of Transparently showed you here, we will continue that path. Of course, depending on the earnings we are generating going forward. But based on expectation today, I think it's still likely that we achieve we'll achieve our targets by the end of 2023.
Thank you. And then one question from Mindal Gas in the Noni Securities. How does the AER improvement of 30% response to the minus 20% of consumption target for 2023. Does this mean the target is already reached?
So this is what makes the regulations a little bit complicated because the 20%, that refers to this index called EEXI, and that is the same as what we today know as the EEDI, which is the Energy Efficiency Design Index. So this says something about the design of the vessel. And we cannot mix that with our 30% AER because the AER that shows us the emissions by a ton mile or a deadweight mile. And that tells us something about how we operate the vessel. So these 2 cannot be compared basically.
Thank you. And then one from David Bate in SEB. On Slide 14, where you compare your fleet to other operators on EVBI, Can you provide some more details around the analysis behind this slide? Yes.
So what we did here is that the only open source to emission data for all ships It's today in the right ship database, that's an open source. So we went into that database and we pulled out, I think it was 3,500 ships, the EEDI or EVDI as it actually is called in the right ship. And then we grouped it on the operators. So that is how we found out.
Thank you. And then one question here from Paul Dahl, Inspire 1 Gehl Markets. How should we think about the Energy Transition's impact on ship values or lifetime? What are items, regulations to look out for?
I think that's, I would say, the $1,000,000 question. Usually, in the past, when you build a ship, you knew that it had a 25 to 30 year economic life But with the existing technology, that's not might not be the case. I cannot give you I'm not prepared to give you my guess. I'm just because there's so many things that we don't know how fast the energy transition will happen. I think Jarek had some interesting Comments about how slowly it has actually gone on LNG.
So we can all be very ambitious for new fuels and new engine times, but it might Take time and the longer it takes, the less the impact would be of the residual, let's say, discussion about residual value. So I can't answer the question, but I can say that it's something that we are concerned with and we are as I said, we are Trying to limit our exposure to such a residual value going forward in our effort to derisk the future.
Thank you. And then what are the supply or capacity impact from the engine power limitations for you and your peers?
I don't think I can answer that. Can you answer that?
Yes. So as I mentioned in my presentation, the it is not expected that Odfjell needs to do a speed reduction on our ships after this regulation gets into force. But it's not easy or quite possible for us to predict this how this would be for Yes, but I think for the industry, we will see a speed reduction within shipping, but this will vary a lot between the various segments. I think that the segment with the least effect would be chemical.
Thank you. And then one more from Paul Dahlmann, Spad Bank Markets. When do you expect to reach your long term targets, including terminal share of activities at 33%.
On that specific question in terms of the terminals of 33%, will take a while. I think when you invest in terminals, it's a slow process. You need to make sure that you understand Where you place your money because the terminals, they fit into the global infrastructure network. It takes sometimes years to to develop a single terminal getting the permits if you're from a greenfield perspective. Of course, you can buy yourself into existing terminals, But I think we prefer not to put a target on it.
Of course, it also depends in terms of how much capital can we allocate to this and Honda and what is going to be that owning model. So we're not ready to talk about that plan. We have we are considering quite a number of options at the moment, but It will take some time before we get there.
Thank you. It appears to be no further questions. So I guess I'll leave it over to you, Tristan, for the final.
Yes. Okay. But then I can only repeat that we are very happy that you have taken the time to participate today. Whether you're watching this presentation live or you're watching it offline, we appreciate your interest in the company. If you did not have a chance to Ask a question because you're watching it offline or whatever or you didn't feel that we answer any of your questions appropriately, please feel free to reach out to any one of us and we'll be happy to take your questions.
And in the meantime, I just wish everybody stay safe and have a good summer.