Good morning, and welcome to Odfjell SE's Annual Capital Markets Day for 2021. This is the sixth consecutive Capital Markets Day we're hosting. This year, as with also last year, it is hosted online due to the circumstances across the globe. Hopefully, we'll be able to have this live and to meet you all next year. We have an exciting agenda for you today with more thematic reviews than what we had last year. First, we will start with our CEO, Kristian Mørch, who will take you through our strategy, which can be summed up in capturing the near term while de-risking the long term. After Kristian, our VP Technology, who is not that familiar to most of you, Mr. Erik Hjortland, will present the next topic, which is energy transition.
A bit about Erik. He has been with Odfjell since 2007 and is today heading the technology department, where future fuel and emission regulations are one of his key tasks. In his 14 years in Odfjell, he has been instrumental in the systematic process of making our fleet the most fuel efficient in the world. He's a board member of Maritime CleanTech and a member of DNV's Environmental Committee, together with other relevant committees. 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, Terje Iversen, will give you a finance update on relevant topics before we hand over to the last speaker of today, which is going to be presented by Global Tanker Trading, Bjørn Hammer.
Bjørn 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 pivotal role in the successful fleet renewal we have just put behind us. Today, Bjørn is in charge of about 140 charterers and operators across the globe and will give you his insights into supply dynamics and its effect on our market before ending with how Odfjell is uniquely positioned in a strong chemical tanker cycle. Kristian will conclude the session with final remarks before we move over to the Q&A. With regards to Q&A, please post your questions throughout the session, and we will, at the end of the event, direct the questions to the relevant speaker. It is time for me to hand over the word to Kristian, who will start the session.
All right. Thank you very much, Bjørn Kristian, and thank you for taking the time to listening in on the Capital Markets Day. As Bjørn Kristian said, we are doing this virtually. 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-19. I'll give you a very high-level strategy update and a market outlook. I'll talk about our fleet renewal and the advantages that we get with that. 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-19 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 rolled out how big an operational challenge it has really been. We think that the Odfjell platform has passed the test in terms of how we have been dealing with this pandemic. First of all, if you look at the bottom left-hand corner and you look at our safety statistics in 2020, it was improved actually compared to 2019. So far in 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. The single biggest operational challenge we have had has been crew changes.
If you look at the second bar on the bottom, you can see that the overhang we had of 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, but that part is not over . In general, in our operations, we have been operating quite well throughout the COVID-19. In terms of commercial performance, we have redelivered 24 ships and taken delivery of 40 new ships during that period. We have concluded the largest fleet renewal in the history of the company. We have improved our COA portfolio. Let's not also forget what happened in the second quarter of 2020 when the product tanker market spiked.
We actually managed to take quite good advantage of that market in the second quarter of 2020. 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 first sustainability-linked bond in the shipping industry globally. We have reduced our breakeven levels. 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-19 crisis or whatever you want to call it. That leads us to the conclusion, really, that the transformation of Odfjell, which we have worked on hard for the last, say, six years, has really been completed.
That is not to say that we don't have challenges. I mean, we have quite a lot of challenges ahead of us, like the rest of the industry. Those challenges are no longer, let's say, internal structural problems or based on internal inefficiencies and so on. They are external challenges that we can use our energy in terms of how we engage with those. 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. 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 de-risking the long term.
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 a high likelihood that we will go into + 90% utilization of the fleet. When that happens, you are in a high cycle. 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. I think we are in the next, say, two to three years, it will be a good period.
That's what we mean about the short term. Whereas when you look at the long term, it's a little bit more difficult to see clearly. There's a technology shift that's going to happen in the world, 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, there's a lot of things that can happen. The picture in the long term is slightly more challenging to see clearly. Our strategy is designed to capture the short term. How are we going to do that? Well, first of all, when in an upcoming market, you need to have capacity to sell. We need to make sure that 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 second quarter of 2020 when this product tanker market spiked, we actually had free capacity, and we could make good use of those markets. It's about having capacity to sell in an upcoming market. It's also a matter of selling intelligently. Don't lock in freight for the next couple of years when you're going into a high cycle. It's about having good efficiency and focus on your operations so you deliver on your promises to your customers so they will return. That's basic operational view, but very much when you capture it's about having that capacity available when that upturn comes without betting the farm on that will happen.
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 de-risking the long term, it's very much about strengthening the balance sheet, reducing cost of debt, and Terje is going to speak more about that in his section later. It's also about reducing our exposure to conventional technology, and Erik will talk about that. It's about maintaining what we believe we have today, which is the market leadership within ESG, because we have the most energy efficient fleet in the world, and we believe that that's a competitive advantage. 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 zero 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. 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. Internally in our own performance, it means that we will have efficiency gains and unit cost reductions. 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 it'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. We believe from an activity level, whichever way you measure that, it has to be, let's say, close to a third. 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, we start a little bit of looking at demand side from our customer's perspective, what kind of world do they live in at the moment? On the bottom of this slide, we have taken the top 10 chemical producers in the world, we have added their sales forecast going forward. As you can see, the total sales in 2020 was $523 billion. In 2021, that number is going to go up to $636 billion, in 2022, it's going to go up to $680 billion. $680 billion in 2022, that's a 7% increase from 2021, it's a 30% increase from 2020. I realize that sales is a function of both volume and price. If you look at it from our customer's perspective, 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 or 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. That filters through to the chemical producers. There's a very, very strong fundamental demand for our chemicals. At the same time, we have actually seen a de-stocking, especially in Asia, quite significant de-stocking. We are also approaching, apart from the growth, we're also approaching a restocking cycle. That paints a very positive picture about the demand. There's been some disruptions. With the weather situations in the U.S. Gulf, 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. 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. There you go. 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 ton miles, is the fact that chemicals on average day 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.
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 grow further, as you can see on the right-hand side of this slide. Summing the supply-demand picture up, we believe the 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 two to three years. 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. With only a little bit of help from product tanker markets, we believe that supply could actually tighten. That's why we argue that we are going to get into a territory where we may go above 90% utilization of the chemical tanker fleet. When we are, historically, when we have been in that area, then it means we 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, and this is only looking at the super segregators, not at the, let's say, commodity chemical tankers we have.
Between 2015 and 2021, we have increased that fleet with 50% from 22- 33 ships. You can see we have some pool ships and some bareboat ships in that fleet. We have been increasing our footprint in the, let's say, core tonnage segment. At the same time, since 2018, we have been lowering the average age of the owned tonnage from 18 years- 14 years. We've really been getting some new and effective assets into the fleet. In the middle graph on this 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 is down 15%. That's on a comparative basis. 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 have. It's been reduced by 23% because we have also been replacing time charter fleet with pool ships where we don't carry any of the downside, but we do carry some of the upside, and that's what we show on the right-hand side of this slide. In terms of capital allocation, there are three things to note. First of all, on the CapEx, we have zero CapEx needs in Odfjell Tankers in the foreseeable future, and we have zero capital injection needs into Odfjell Terminals, that means that it gives us quite good visibility on CapEx. We don't have any immediate investment needs in tankers. We do get the question on when are you going to start investing in new technology? The answer I normally give is that we're 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. From a capital perspective, CapEx perspective, we don't have any immediate investment needs. That means that the capital that we generate or the cash that we generate can go to two things. First of all, it will go to deleveraging, Terje 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. Secondly, we want to establish a fixed dividend policy and start returning money to our shareholders. 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. Every day you read the newspaper, you tend to get confused, at least I do. There's quite a lot of rumors around. It's difficult to see clearly. We believe we have quite good overview. We have made very good progress. There's no doubt that the carbon emission is transparent. We need to be able to offer transparency in terms of what is the CO2 footprint when you ship with Odfjell. 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.
As I mentioned in the beginning, we believe that Odfjell has a market leadership position within CO2 emission. The graph you're looking at here on the right-hand side is the EVDI measurement, which is actually a way to look only at the assets. It doesn't capture how you actually utilize the assets. It looks at the assets themselves compared to the 2008 baseline, which is also what IMO is going to be using. 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 three operators that are behind Odfjell are not who I would call our key competitors.
In terms of the competition situation for Odfjell compared to our key competitors, we are quite far ahead in terms of being able to offer the most energy efficient transport in the industry. 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 Erik Hjortland, who's going to speak about towards zero emissions.
Thank you, Kristian. Good morning, ladies and gentlemen. 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 zero emission for both shipping and for Odfjell. I will try to be as concrete as possible in this presentation without going too much into details. The reason for that is I see often in these kind of presentations that they have a tendency to be a little bit fluid. I think one of the reasons for this is basically that the regulation itself are fluid. First of all, it's quite complex material.
Secondly, there are still 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. I think it's important in such a landscape to try to simplify, and it basically boils down to three major milestones that we have to focus on. The first one is in 2023, where we have to ensure that our ships, they have to reduce the consumption per transport work by 20% compared to a baseline in 2008. This is also referred to as the EEXI regulation. The second milestone is in 2030, where we have to reduce our emissions per transport work by 40% for each vessel compared to a baseline in 2008. What complicates 2030 a little bit is that we actually don't know that baseline yet.
As I mentioned earlier, I think we will have clarity on that within next week. Then there's the big one in 2050, where shipping as sector has to reduce their total emissions by 50% compared to 2008. That means that we have to improve the carbon intensity between 70%-90%. As you have probably seen in the last couple of weeks in the papers or in the media, this has been heavily criticized by many stakeholders. I think this is just a political statement from IMO because if you have a regulation saying 70%-90% reductions, for all practical purposes, that is the same as to say it's zero emission. That is our focus for 2050, and that is zero emission. Before we move on, I just want to spend one minute on where we come from.
I know Kristian, 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. I think what's important here is to just highlight that you can do a lot with existing technologies. 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 successfully has got us where we are today that will also successfully get us where we should be in 2023, 2030, and eventually 2050. The results from what we have done so far, as I said, using existing technologies focus on fleet renewal combining operational and technical measures on the vessels is that we have reduced our emissions per ton mile on the managed fleet by 30%.
I think the reason why I want to show this is that this means that the upcoming regulations, and they are tough, but the point is that when we have this kind of a starting point, I think this is something that we can utilize to our advantage, definitely. This is a good starting point, that's for sure. 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. I think there are some misunderstandings on this out there. I just want to make a long story very short, and that is that this is regulated in MARPOL, which says that it is the holder of the so-called DOC or document of compliance that is responsible to get this done, basically.
That means that for us, this means that the compliance to both 2023, 2030, and 2050 belongs to a ship manager and a bareboat charter. Indirectly, of course, this also means that the vessels that Odfjell owns is under our responsibility. 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 IMO regulation belongs to the manager and owner of those ships. I think that's important to clarify in the beginning. In 2023, I just wanted to go a little bit more into the details here. As I said, this is about 20% reduction. One 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.
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 that we reduce the maximum speed or maximum load on the engines on the vessels. This is basically the same as putting a brick under the accelerator pedal in your car. The power is there, but you can't use it. This is something that we will do on 24hr ships. As I mentioned, it's not complicated. It's not very costly either, 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 the shipping sector through speed reductions.
Our analysis show that they will not be necessary with speed reduction for the Odfjell ships. We can comply with the regulations without affecting our ton mile production. That's important. What you see here on the slide is basically our plan when we have to start the process in order to get compliant within the deadlines, which is starting in the 1st of January 2023, and it will go further from there. This depends on the docking schedule of the ships, etc . Let's do some clarifications on the 2030 regulation. This is about the 40% in our existing fleet. This is where this carbon intensity indicator comes in. This is where it starts to get a little bit complicated because IMO, they are still debating this.
We hoped a couple of weeks ago that this was going to be landed in the intersessional meetings in IMO, it wasn't. We follow the developments closely here, it is difficult to see exactly how this will play out. We know the overall ambition of a 40% reduction within 2030, that is what we plan for, regardless of the discussions in IMO. What will happen here is that the ships from 2023 until 2030, they will get a rating A to E depending on basically the performance of the ship or the emissions per ton mile using the AER as an indicator. You will be plotted somewhere in this band. It is important now is that you have to achieve a rating of C, B, or A in order to be compliant.
If you get a D rating, you can get a D rating three 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 to immediately, within one year, give this plan to how to get back to A, B, and C. What we have done in Odfjell is for the last, or actually one year ago, we made vessel-specific plans, and we mapped the situation, of course, and we made vessel-specific plans for the entire fleet. 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.
As I mentioned, there are still uncertainties in IMO, so we have to revisit our plan, review it, and maybe update it within Q3 this year, leaving us approximately one year of detailed planning before execution. I think we are starting on what's really interesting here, and that's about zero emission and 2050. What's important here is that this will hit the newbuildings 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 2050 regulation after a revision in 2023, that is a scheduled year for revision of the IMO strategy, this can easily be 2040. I think that the chances are bigger that this will come earlier than later. As I mentioned, this will affect our future ships.
Let's share with you now our thinking on this because there is, as Chris mentioned, a lot of information on this in the media. I think this is a very important slide. I know it looks really busy, but I will try to walk you through the highlights here. 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 at least low-carbon operations or zero-carbon operations. Then we evaluate all these fuels on various fuel properties that are important for us. 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.
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. What's important now is I just want to share with you the highlights here from our analysis of this. We can start with batteries. There are many people who still believe that batteries can be the solution even for deep sea shipping. I think this figure here just tells us that is a fairytale. Because what this figure says is that in order for us to run one of our ships on batteries, we have to have four sister vessels behind it just to carry the battery package. That is not a realistic option.
To charge this battery package, to do that within 10 hours, which is a typical bunker operation, that will require a full capacity from six Norwegian power plants. Batteries is not a solution for deep sea shipping. We see, especially in Norway, a lot of focus on hydrogen. Hydrogen comes in two forms. The compressed version, that is the most simple version of hydrogen or form of hydrogen. Again, you can see here what will happen with the volumes on board that you have to allocate to carry the fuel. This figure shows that we have to allocate one quarter of the vessel's total volumes just to carry the fuel. That's not acceptable. Hydrogen also comes in liquid shape, and here you can see that the volume increase is still a lot, but it's starting to be acceptable.
What worries us is this one, that in order to keep hydrogen liquid, you have to cool it down to -253 degrees, which is almost zero Kelvin. We can just imagine cost complexity, not at least the energy required to keep hydrogen at this state. The picture that is painted out there on hydrogen as a future fuel for shipping is something that we just don't understand fully yet based on the figures that I've just shown. What's interesting with the hydrogen is that that is basically the feedstock or building block for almost all other alternative or zero emission fuels. That is 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. 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. We only have to cool it to -33 degrees to keep it liquid. 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. We are quite interested in ammonia, w e follow the developments very closely. The problem with ammonia is that it simply isn't available for us, at least for the deep sea operators like us. What is available and already out there is LNG.
As you can see here with LNG, that is not a solution for 2050, but it can be a very good interim solution because it will provide us with tangible and solid reductions along the way towards zero emission. 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. Secondly, it's already available. The infrastructure is not good, but it is good enough to start this transition. I think when you look at the developments for 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 to get 400 ships on the water and an infrastructure which is still not very good.
I think that is very important to keep in mind when we discuss the future for shipping in terms of zero emission fuels. These zero emission fuels are not available at the pump today, and it will take a long time before it is from our perspective. 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 wake perspective, by the way, they are not any significant. When it comes to these kind of products and also biofuel, we see that many ship owners, they opt for this solution. We cannot rule it out. There are things here that we don't understand fully how come this is put forward as one of the alternatives towards 2050.
The reason for that is, of course, that all of this have to origin from veg oil. There is a total production in the world of approximately 80 million tons of veg oil. If shipping is to transform into the use of biofuel as the predominant fuel for shipping, we will require 400 million, 500 million, 600 million tons per year. We can just imagine the effects of that on the environment. Unfortunately, we don't have time to take that debate to its fullest here now, but at least we have some reservations on this. Secondly, this is also an important point. Biofuel is actually not allowed to be used in engines today.
This is regulated in the fuel codes. The ships that consume this fuel today, and we read about them in the papers from time to time, they have got flag state approval case by case. The reason for that, there are many reasons, but one of them is that you exceed the NOx requirements. You get in conflict with another GHG gas. The problem is that you don't know that in advance, y ou have to test the fueling in advance, which also takes two to three weeks to get the answers to. This is going to be quite complicated if this is the solution for shipping. What I paint a picture of here is that there are many concerns to evaluate here, and there are pros and cons with all of these kind of fuels.
I agree, I don't think there is any silver bullet here. That has been said many times in the papers. I think we can rule out some of these, at least for deep sea shipping. The complicating factor here, at least for us as a deep sea operator, is the amount of bunker ports that we call. We have approximately 90 bunker ports that we get fueling today. This is a picture showing where we have taken fuel the last 12 months. We have done 1,200 operations in 90 ports. 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 the complexity, and I think we have to be realistic here with when there will be global supply of zero-emission fuel. That will take quite some time. We had a meeting with one of the largest ammonia producers a couple of weeks ago. We showed them this picture, and we asked them, "When can you have a global supply of green ammonia?" They answered 2035, 2040. I think that's important, and that is the reason why I think LNG will have its role from now and at least 15-20 years ahead. I think all of what I've shown on the last slides boils down to that there is huge uncertainty here to which alternative fuel that will see the highest adoption be commercially available in the long term. We see many shipowners argue on this.
Not only ship owners, but also fuel producers and other stakeholders argue, what is the best fuel? What will the next fuel be? We think that is risky to focus on trying 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. To do this and bet on methanol or bet on hydrogen or bet on ammonia is something that comes with a huge risk from our perspective. Also, as I mentioned in the last slide, I think it's important to realize that with our trade, we cannot commit to zero emission operations from day one, but we can commit to zero emission capability.
With this uncertainty and the fact that we can't control the infrastructure part there, the supply of alternative fuels and what that fuel will be, we have to have a different approach to this. 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. What we can control is what engine we put on the ships, and that is the solution here from our perspective. That is the strategy. Focus on picking the right engine, the right fuel tanks, and the right fuel systems that connect this together. This is also quite a busy slide. I just wanted to show you the headlines here. We have four alternatives. There's batteries. I haven't included it in this slide because it's not realistic for deep sea vessels at all.
We have the atomic or the molten salt reactors. A lot of focus on that these days. Very interesting technology, but 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. When it comes to the fuel cell technology, this comes in two subcategories, something called PEM and something called SOFC. The PEM fuel cells, that is the 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 hydrogen, they are having PEM fuel cells. It works.
The problem with PEM is that if you believe in PEM and you want to get that in your ship, you also say that you believe in hydrogen and only hydrogen. This is not acceptable technology for us because this will give us a higher risk that you select the wrong fuel. The other things there as well, as I mentioned earlier, with the volume requirements, etc . That is why we are so focused on this fuel cell technology, the SOFC. As you can see, this has full fuel flexibility, a nd when I say full fuel flexibility, I really mean full fuel flexibility. It takes basically everything. That is the good news, that you have this fuel flexibility, which is to the core to our strategy. The bad news is that it doesn't exist yet.
That is the reason why we have embarked upon this project since 2018 together with Wärtsilä, Prototech, and Lundin Energy, to get the world's first fuel-flexible solid oxide fuel cell on board one 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. After successful testing, it will be mounted or retrofitted on, as I mentioned, one of our newest vessels, probably Bow Orion, after that. Now, the beauty with this fuel cell is that, first of all, the fuel flexibility, as I mentioned, but the second part is, and this is the main reason, is that there are no moving parts in a fuel cell. We get the electricity available to us from the fuel, not through combustion, but through a chemical process.
That means that the energy losses is very small compared to a combustion engine. Actually, it is possible to reduce by 50% your consumption on a fuel cell compared to a conventional combustion engine. We must remember that as we move forward now, there will always be two pathways that we have to follow. Fuel flexibility pathway and zero-emission fuel. The second is whatever fuel it will be, we need to have the lowest consumption among all our competitors to remain our 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 cell, it's the container you see back here. This is a 1.2 MW unit, which is the equivalent of one auxiliary engine. Normally, our ships are equipped with either two, three or four auxiliary engines. This is a pilot.
Our analysis showed that 1.2 MW 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 zero emission if we get, for instance, green ammonia. All right. 1.2 MW, 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 MW. Our analysis showed that on the size of three auxiliary engines, we can cover the entire energy demand of the ship up to 10 MW. 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 ton mile production, offsetting the higher costs of a fuel cell. This is very interesting. 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. 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 are used to. There are several technologies, sub-technologies there for a combustion engine. Let's narrow it down to this one. This is what we are looking for. This is the most fuel flexible engine out there. This is available. We can get this tomorrow.
Here you have a pretty decent fuel flexibility delivered from day one with possibility to further retrofitting to, for instance, ammonia at a later stage. We have completely mapped what this retrofit will actually mean. We can say that we know exactly what parts we need to retrofit. This is about components on the engine. This is not a very big retrofit. It is actually less complex than derating an engine, which we have done on many ships already. This is the engine that will de-risk all investments moving forward from our perspective. Just as a closing remark, and I think this is also really important in today's environment, and that is I just want to share with you what does it actually take for us to go zero emission? There are basically four things that must be in place.
The first one is, of course, the technology. As I tried to show in this presentation, from our perspective, the technology is already there, both in terms of fuel flexible tanks, fuel flexible engines, and fuel flexible fuel systems. That is already there. We can tick it off, basically. What is not there ready yet is first and foremost the rules and 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-wake? Because this is important to select the right fuel, of course. 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. We see also that getting approval in principle shouldn't be any obstacle to us at least. What is a huge challenge here is the infrastructure, which is bullet point number three here. We need zero emission fuels in 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. I think what is under-communicated there is bullet point number four, and that is the price.
Let's say that we put a vessel on the water with fuel flexibility and zero emission capability. The rules and regulations are in place. The green ammonia producer has come to us and said, "Listen, the map you showed us a couple of years ago, we can supply on all those ports." We can still not do this as long as the price is as it is today. All the alternative fuels are basically three times as expensive as conventional fuel.
As long as our competitors can sail next to us legally on today's fuel, paying one third of what we have to pay, we simply can't do this. 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 called black fuels and the greener alternatives of zero emission fuels. We need price parity between those two in order for the change to happen. I think this is really, really important and this must be global mechanism, and it must be regulated by IMO from our perspective. This must be in place until only the greener fuels are allowed. If this is not in place, my prediction is that this green shift will simply not happen before this is in place.
To summarize for the last couple of minutes, we have tried to show you that the 2023 regulation is not a big problem for us. We have good control on that one. The 2030 regulation with the 40% reduction, we have a vessel-specific plan for all the ships that we manage. There are still some uncertainties in IMO with the regulations. Hopefully much of that is clear next week. We already know that some important issues will be done at a later session in IMO. We have focused most of this presentation towards zero emission. 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 de-risked strategy compared to many others.
What has been the main message is that it's really difficult to pick a fuel that we believe in for next year. As I probably already revealed in this presentation, personally, I believe in LNG as a transition fuel and then green ammonia 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 new building decision at some stage, and that must be taken when we don't know the full picture of what the next fuel will be. You need to know something about that when you design a vessel. Our next vessel, whenever we build that will definitely sail into 2050. As I mentioned earlier, probably this regulation will hit us earlier as well.
It's important for us that we have zero emission capabilities already on the next vessel that we build. What has also been important for me in this session has been to really show you with some figures that deep sea differs greatly from short sea. There are alternatives that just simply cannot be alternatives for us, hydrogen and battery, because of the distances that we sail. That is the reason why we believe in fuel flexibility. That is the key here. That is what will de-risk our investments and it will leave most doors open for us. We have maneuverability as the picture gets a little bit clearer in the years to come.
We follow two pathways here. We have the fuel flex solid oxide fuel cell pathway, and we also follow closely a fuel flex combustion engine pathway. I think it's important also to emphasize that again, we have two pathways on that is of course to get zero emission capability, but the second one is to have as low consumption as possible of whatever fuel that will be. Thank you for your attention and I think I will leave the floor and the mic to our CFO, Terje Iversen. Thank you.
Thank you, Erik, and good morning to all of you. I will in today's presentation focus on what Kristian talked a bit about in his statement in the beginning, how we are going to de-risk the long term, how we are going to strengthen our balance sheet to reduce the leverage and also to then reduce the cost of capital and then in the end paving way for increased free cash flow to the equity. I've divided my presentation into some sections here.
I will start with a short recap of the financial development the last few years. I will go more into the details how we have refinanced and how we have worked with our debt portfolio the last 12 months. I will take a recap of the financing initiatives we have done as a part of that to reduce the cash break-even and the outcome of that so far. Before I go into how we are thinking going forward regard to further deleveraging and further then reduce the cash break-even and also indicate what kind of initiatives that we are currently looking into. I will then go into how that can turn into free cash flow development, increase free cash flow from after debt service and also free cash flow to the equity. How that ties into the finance strategy at the end of presentation.
If I start 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 quite substantially actually since the market bottom 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 today than we had a few years ago, we see increased EBITDA generation from that business. Looking at the balance sheet, we see that equity ratio is quite unchanged actually 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 has also then put a weight on the equity ratio. 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%-60% loan-to-value for our vessels. The same goes with equity ratio, w e have a long-term objective to be within 30%-40% equity ratio. Of course, we are in the lower range of that target. When it comes to the cash break-even, we can see that over the longer term, we have reduced that quite much actually since a few years back.
We are still not where our target are when it comes to the cash break-even long term that we are targeting being between $18,000-$19,500 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. Of course, looking at the return on capital employed and return equity, we have seen increase the last few years as we have also seen that the results improve. If you go more into the details about the debt development the last couple of years, especially then since end of 4Q18, we see that we have totally increased the debt. That is mostly associated with the fact that we have taken a lot of deliveries of new vessels, meaning that we added around $300 million U.S. new debt for the new vessels.
At the same time, we have reduced existing debt or older debt with around $160 million in the same period, and that we have done despite the challenging market that we have seen. Looking back at the beginning of the pandemic last year, we did add some debt to the new building that was delivered at that stage. We also did some contingency driven initiatives to build liquidity reserves to be able to come through the pandemic. That also led to an increase in the debt during the two first quarters in 2020. Since that, we have also included the full debt for Odfjell Gas vessels when we did the acquisition of the 50% outstanding shares in Orca Gas. That is also adding increased debt to the total balance sheet. Since that, we have also then started to continue our path to deliver our balance sheet.
We've done a few refinancings 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-19 with around $50 million in increased liquidity. On the bond side, we have done two refinancing the last year, We also have then reduced the total bond debt to around $11.5 million. What about our cash break-even? As I said, we had a target to reduce that to around $18,000-$19,500 per day, meaning that we had to decrease the total cash break-even for our vessels with around $3,000-$4,000 per day. By cash break-even, I mean the time chart I needed to cover all OpEx, G&A, interest, debt amortization, and also running CapEx on our fleets.
So far, we have achieved around $775 per day of that target, so we are not there yet. Of course, there are several reasons for that. Looking at the various elements here, we see that secured and amortized debts, we have a target to be within a range of $500-$650. We are close to $1 billion today, and that is of course tied into the fact that we have seen new buildings being delivered, and that has increased the total debt. Even though we have been able to secure some low interest leading to some savings and some reduction in the cash break-even per day. Non-amortization debt, which is our bond debt and secure 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.
As I mentioned, we have slightly reduced the total bond debt, reducing also our running interest on the bond loans. Extending and averaging the amortization profiles for our vessels. The $3,000-$4,000 target, $2,000 of that was tied to our plans to extend the amortization profiles for the existing loans, and also when we do the refinancing of the various loans. So far, we have achieved $415 per day in reduced cash break-even. We have stretched the profile for several loans where we have profiles now extending to 20 and 25 years. At the same time, it was also a consideration if you want to stretch the profile too much according to the bank's likes, that comes with a margin.
It's a balancing whether you should extend it to the maximum or whether you should go for a slightly lower margin on the loan. On encumbered assets, including unencumbered vessels, we have around $70 million, close to our target. As I said, summarizing the debt is on the high side compared to our targets. We still need to reduce the debt going forward to achieve our targets. Even though $675 per day doesn't seem that much, if you add up to the number of sailing days for our fleet, we are around $60 million in savings or reduced cash outlay on the debt service going forward. It's really a material amount anyway. This is showing what we have done on the debt and how the costs on the debt has developed the last three 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 has been for a long time. With this good appetite amongst the banks to compete for financing for Odfjell, I think we are considered as a blue-chip companies within the shipping sector, meaning that most of the shipping banks that are active in the market want to be a part of the loan portfolio or lend us to Odfjell. On the financial leases, we see quite a good decrease in the margins we are paying on our leases. That is related to some refinance 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.
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. In the time chart on the bareboats, looking at the capital cost for these, that is also on the right direction and going slightly down from year-to-year. On the bonds, that is also quite stable. We see improved terms for financial leases and the banks, we still expect the bond market to really appreciate the Odfjell credit and hope to see reduced margin there going forward. Of course, it's up to the market to decide what margins we obtain. We are left with the cost of equity being, of course, our main challenge and have been that for some time.
The share is price-to-book around 45%, meaning that it's difficult for us to use equity or shares as equity or currency in the market. If you look at the values and look at the broker indicating values end of last year and sum that up, we have a market value of fleet around $1.581 billion. Including the debt on those vessels of $977 million, we have a net asset fleet value of around $600 million 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, you have a total equity around $569 million compared to market cap, excluding any over treasury is just at $261 million. Of course, 45% price-to-book is not satisfactory, again, it is the market to decide.
Also looking at the net asset value when we include the broker indications, we have even a net asset value above the total book equity at $628 million. What to do about that going forward to reduce the cost of equity? It is not straightforward, of course. We need to see increased earnings. I think we have to continue with our measures to reduce the cash break-even and further refine our capital structure to see that the pricing of the share is closer to the net asset 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 in the 4th quarter this year and also in the 2nd quarter 2022.
Six loans in total, $30 million, that is totally manageable. We have a bond maturing in June, I think in the second quarter 2022. We think that is also highly manageable. We will based on the earnings, based on our contingent plan or plan to reduce the debt going forward, we will consider whether we should refinance that, whether we should do tap issues on the existing bonds or whether we should replace the bond with cash on our balance sheet or lower yielding external debts. That is one of the tools that we can look into going forward. This is quite a comfortable picture for us with quite limited refinancing needs and also looked together with our CapEx plans, which is close to zero for the coming years.
That paves the way for us to continue our plan to reduce cash break-even and reduce the leverage on our balance sheets. Here we show a picture of some of the tools that we think we have in our toolbox today and are considering to use going forward. We haven't made any decisions on what kind of targets or any of these measures we are going to embark on, but we are listing to be transparent what are we considering and what are the tools we think we have available going forward to reduce the cash break-even and reduce the leverage. Of course, we have revolving credit facilities which we can repay on that will reduce the capital cost going forward. We also have the maturing loans that I mentioned, a total of NOK 30 million maturing in the next 12 months. We could repay those earlier.
That could free up around $740 million 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 nine vessels, quite new vessels that are financed by quite high loan-to-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 reducing the leverage on those vessels from around 75%- 65%, which is more bankable terms, so to say, we could then have a reduction in debt around $25 million-$50 million a year. Which going forward could reduce our cash service with around $612 million. It would reduce the cash break-even 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 on traditional bank financing. We could do that in a cash neutral transaction just extending the loan profile and hopefully also reduce the margin of those structures which in principle will be cash neutral but in the longer term should reduce our debt service around $5.7 million or close to $1,500 a day for those vessels involved. 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 potentially replace them with lower yielding debts. This is showing how we gradually improve our cash flow, free cash flow to equity and how that hopefully in the end should pay way for sustainable dividend policy, which is more linked to our earnings.
As I said, if we are able to come close to our targets on a cash break-even, 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 break-even around NOK 16 million on an annual basis. The initiatives that I just showed you, that should summarize up to NOK 17 million. We can embark on that in total and NOK 33 million increase free cash flow to equity. 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 the U.S.
In 2024, which this picture is showing, we don't expect or haven't planned for any dividend from the terminals in the U.S. Going forward, we think there are also dividend capacity baked in the existing credit facility for those terminals. Also based on the existing CapEx plan, that should be possible to expect some dividend for the coming years. We are not including any figures there because that will depend on the CapEx plan on how fast we embark on those. 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 we are able to increase that from average time charter rates in 2020, around $21,000 a day, if we increase that to $22,000 a day, that should free up then we are above decreasing our break-even levels.
That should add $17 million. For each $1,000 in increased time charter per day, that should add $24 million to the free cash flow to equity. 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. We did, as many of you know, a bond issue in January this year where we were the first shipping company worldwide to issue a sustainable bond and also the first company within the Nordics to issue a sustainable linked bond. That framework we also use now for several bank loans. This is something also well received by the banks and investors in general. We have now around 17% of our total interest-bearing debt linked to that sustainability-linked financing framework.
There are some pricing effects if you are able to deliver on the fleet transition plan or ambition to reduce the carbon emission from our fleet with 50% by 2030. That is quite modest at the direct pricing effect. We think that we see a considerable indirect effect, meaning that investors are more attracted to financing Odfjell, especially the banks. We see more competition and think we are seeing lower margin because of this financing program being linked to our plans to reduce the carbon emission for our fleet. The sustainable financing market is fast evolving, we think. We are in the lead there and want to continue with that. Tied into what I talked a lot about when new investments at the stage coming out that will be, we think, quite green investments.
It's a natural course in the next term to maybe look into combination of sustainable linked financing and also a green financing structure. If I summarize, we think we are on a good path with our strategy to reduce the cash break-even and to reduce that sustainable and dividend generating levels. As we have said, we have ended our newbuilding program. That makes us in good position to accelerate our deleveraging ambitions. We have reduced our break-even level quite substantially already, but there's more to be done. We have a tool chest. We have various options that we are looking into to further reduce that. That should lead then to gradually improve free cash to equity, both through that deleveraging initiatives but also potential when it comes to the earnings going forward.
As mentioned, we think we have established quite a proven platform for sustainable financing that we are going to develop going forward. As a summary, this ties well into our finance strategy to have access to attractive capital resources. The combined operation strategy when it comes to how we want to finance our core fleet. We are financing more of the fleet, more commoditized fleets through the time charter and double market and also by pools, and ensure that we have a competitive cost of capital as a company compared to our competitors.
We want to secure that we have the flexibility to secure further growth and utilize opportunities in the market and of course to manage risk, which I think we showed quite good when the big pandemic breakout last year when we had contingency plans and we also prepared a bridge finance in case the bond market closed. We did a new issue and we succeeded with that, and we think we have the necessary flexibility going forward to manage what risk should come up in the market. In the end of course to be able to deliver attractive returns to our shareholders. That was the end of my presentation and then I will leave the floor to Bjørn Hammer, Global Head of Tanker Trading in Odfjell. Thank you.
Thank you, Terje, good morning, everyone. I will now move on to talk about Odfjell and the 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. 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 that the underlying drivers are in place for a stronger chemical tanker cycle. As Kristian was saying, we are seeing that the end user demand for chemicals have coped well during the pandemic, and many of our key markets are back to pre-COVID levels. Secondly, fleet growth remains under control, and we believe that the influx of swing tonnage into our markets have peaked, and that will contract over the coming months.
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 in respective end user markets. As you can see from the map here, with all the blue lines, this is how we trade our ships. We trade all around the world with very little ballast. This means that we are depending on all key markets to get attractive round-trip economics. The result is that every time we see an increase in lockdowns, our economics are immediately challenged.
We do believe that the worst is behind us, and the European markets have started to recover already, and we see that the increase in chemical imports follow very quickly. India, South America, and to some extent, Southeast Asia, are currently the remaining puzzles that needs to be resolved before we see a healthy market again. At that point, we do believe that it will all become very functioning. 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 the demand, but it is really the supply that has been the challenge. There are three important factors to look at in order to understand what supply will look like in the future.
If we start by swing tonnage, we are seeing that there are a negative pressure on the rates in the MR tanker that has forced a lot of IMO Type 2 capable MRs into the chemical tanker market. As we are seeing from the chart to the left, the very strong momentum in the clean market we saw back in spring of last year pushed a lot of the CPP ships back into their natural market. As that market has softened over the second half of last year and the beginning of this year, there has been a gradual reversal. Currently, there are about 10% of the available MR capacity trading in chemicals compared to the historical average. However, as we see post-pandemic and expect ability to increase, we expect the MR markets to firm up, and that will push MRs back into their natural environment.
At that point, we will see the influx of MR tonnage 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 newbuilding market has come in as a consequence of a number of reasons. First and foremost, we have a technology risk or the risk or challenges in selecting a propulsion system. Although we are starting to see technology available in the market that could make vessels for a 25-year lifetime, and referring back to what Erik was saying, this is not yet fully adapted in the market. 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, and 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 limited. Another important factor that is holding down the newbuilding activity in the chemical shipping is that there is a lot of orders in other segments which has driven the prices up. That in combination with high steel prices, makes us believe that there's going to be limited of newbuilding activity. Still are some Japanese yards that are actively seeking new orders, but there's another 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. The last important factor to look at is the age profile 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 6.1% of the fleet that is over 25 years by 2023, there is an overrepresentation of the specialty tonnage. Also in that segment of tankers that will become older than 20 years in 2023, we see the first wave of Japanese-built tonnage. This is tonnage that was not initially built to last as long as 25 years. We see a lot of these ships are being sold off to secondary markets to trade such things as fuel oils. Another important factor to look at in order to understand the dynamics in our market 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. As there are still a lot of financial investors seeking an exit and actively marketing their fleets for sale, we do believe that there are more consolidations in the pipeline. 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.
As we can see to the right on the chart, the recent consolidation is basically placing ourselves together with MOL and Stolt in a position of our own, and certainly when it comes to catering for the more global COAs with high sailing frequencies and long-haul trades. The sum of all is that after many years in the doldrums, we believe in a stronger chemical market that will change the dynamics in our favor. We expect improved spot market dynamics as we see a recovery in key markets post the pandemic, bringing the global tanker market back to the positive trajectory we saw prior to COVID. The supply outlook remains well under control with reduced presence of swing tonnage and an aging fleet that is not renewed as newbuilding activity remains low.
In return, this improved spot market will reduce owners' willingness to pursue COA volumes. 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 COA market. Now we move on to talk more about how we are uniquely positioned to capture the upside in the market. The Odfjell Tankers trading platform is 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 is 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 of our fleet, even as COA volumes fluctuate, and it also enables us to take advantage of a stronger spot market. 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 four different markets. These are specialty chemicals, easy chemicals, vegetable oils, and CPP.
These markets have all different characteristics and different market outlook. Specialty chemicals is characterized by high barriers to entry and a high COA coverage. 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 easy chemical segment, the barriers to entry are lower, and the market is more fragmented, 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. The potential upside we see here is further fueled by the fact that we expect a reduction in competition from swing tonnage.
Vegetable oils has low barriers to entry and is mainly spot driven, it's considered a mature market. However, as we see a growth in biofuels in the coming years, that will affect the demand in this segment. Also this is a less attractive segment for CPP owners as the CPP market strengthen, this has mainly to do with the fact that there are last cargo restrictions and a lot of cleaning requirements that will be challenging. 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. How are we positioned to best capture the upside in these different markets?
Of having completed the most extensive renewal program in the company's history, we now have the most modern fleet within our core markets and leaving us with a lower unit cost through reduced fuel consumption and increased cubic meter capacity. Since 2017, we've done a number of transactions. First, we took over the 5 CTG vessels from AVIC Dingheng, and later on in 2018, we went on to take four new buildings and another four sister ships in pool through the Sinochem transaction. In 2019 and in 2020, we took delivery of both four large chemical tankers from yards in Japan, in combination with our own specialty new building order of six new ships from Hudong. We're not yet done. We have also four new 25,000 tonners being delivered to us during 2022 and 2023. That gives us the most competitive fleet of all in this segment.
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. 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. With reference back to the market outlook for the various segments and position as well to the expected change in the global energy and petrochemical markets. Finally, a sizable fleet of coated tonnage will enhance our service to our customers and to their requirements. As a result, we today operate the largest and most flexible deep sea fleet in our industry.
We normally divide our fleet into five different categories, which are super segregators, large stainless steel, medium stainless steel, regional, and coated vessels. 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.
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 at the same time limiting the downside. We have the most competitive specialty tonnage, giving us the low cost through reduced fuel consumption and increased cubic meter. We have a unique split of stainless steel and coated vessels, enables us to capture the upside and opportunities in easy chemicals, vegetable oils, and CPP. With that, I will give the word back to Kristian for some final remarks.
Thank you, Bjørn. I just want to say before my concluding remarks that it's not too late to post questions online in the Q&A box. I can see that a number of questions came in, but it's not too late, so please post your questions. We will take them afterwards. There's some quite, I can see detailed questions by Erik that I hope he will answer. 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-19, we have been focusing on operations. We believe that the Odfjell platform has passed that test, b ecause while we have operated well and efficiently throughout COVID-19, 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. 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 two to three years. What happens after that, we will see. We think we are well positioned to take advantage of the upturn. We are not betting 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.
As I said, we are 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 will be to de-risk that future, not expose ourselves a lot to or reduce the exposure to conventional technology while we understand and invest in new technology when that time comes. Today, we have not spoken a lot about the 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, is 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 platform 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 terminals should fund themselves. 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. 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. 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 four of you. The first question is from Petter Haugen in Kepler Cheuvreux. "Highly interesting presentation by Erik Hjortland. Thank you." This is divided into a couple of questions here. Number one, "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 2023/25 from the EEXI regulation in any part of the global shipping fleet?"
Okay, thank you. It's a good question. What I said about our fleet is basically that the EEXI 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 2030, this is the 40% target. That will of course affect us. We need to do many initiatives on many of the vessels in order to achieve it.
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 an NH3 when available? Or is a new supply system required when transforming LNG to NH3?"
You need a different kind of supply system if you want to retrofit this. What is available today is the engine that I mentioned in my presentation that is basically available as it is today, where you can start with LNG. I would say that the plan would be to have already ammonia tanks from the very beginning, and then later you do some changes to the fuel systems. Most changes are on the engine itself. As I mentioned also, the changes or adaptations are not significant a ctually.
T he third question from Petter Haugen again, could you share some concrete numbers on cost differences between ICE versus FC, both on CapEx and OpEx?
That is really difficult to answer. What we know is that the fuel cells are more expensive than a combustion engine. 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 to us. The SOFC fuel cell, as I mentioned, that actually doesn't exist. We know the cost for our projects, and the costs are high, but that is not representative for the cost when this is industrialized and commercialized. It's actually premature to say what the prices of the SOFC fuel cell will be.
Thank you. One question here from Lars Bastian in Arctic. It could be answered by both Kristian and Bjørn. 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 to get the rates and the contracts also up 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, the ships that are in that market and capable of doing those contract as they become older and there's a reduced supply of those, we will see an improved dynamics. I think the most important factor is we need to see an improved spot market.
Thank you. Another question to Terje. 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 external banks. Already 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. Then it's natural for us also to develop a sustainable linked financing framework for us to continue to do issuances under that framework or a developed framework. 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. From Lars Bastian in Arctic Securities. Ordering new builds against fixed commitments from customers instead of speculative orders, is this something you see as an opportunity in the future for Odfjell or the segment, considering the high risk related to ordering over the next years?
Well, that's partly a philosophical question, I guess. I don't see that really. I think building ships for dedicated trades for customers is, in effect, an interest rate cost of capital game. That's just not our business. We operate a, let's say, a liner type system. When we invest in new ships, we invest in the Odfjell, say, system, our ability to deliver services to many customers. I don't think that we will be pursuing purpose-built tonnage. If there is special designs required for a special trade against a certain contract for some part, we'll be able to adapt a new order to that, perhaps. In general, we are investing in the total system in Odfjell, so I don't think that what you're suggesting is an option.
One follow-up from Lars Bastian in Arctic. There are now a lot of initiatives and committees related to solve 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?
I think we should just welcome all initiatives out there. The more we discuss this and share ideas and agree on the way forward, the better it is. 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.
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?
First of all, after this has been installed, it will be tested for approximately one year on our vessel before we make any conclusions. After that, it's of course a discussion how to take it from there. This is about scale, and that's basically everything I can say about that at this point in time.
From David Batty in SEB. On your comments on going into 90% utilization markets and a higher rate environment, how are your customers reacting to this outlook when freight costs go higher?
Well, they are not reacting yet because, as Bjørn has pointed out, the markets are not as strong as we believe that the fundamentals will favor. 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. When the supply is tight and demand is high, rates will go up. I think if you look at the profitability and the sales for many of the chemical producers, you also look at the profitability per ton, 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.
Of course, like any rate increases, 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. From Lars Bastian in Arctic Securities. How is scenario where crude and CPP markets remain depressed impact your chemical tanker market thesis?
I think what we saw in the 2nd quarter of 2020, and also the 3rd quarter, I guess, is that when the CPP markets take off, it has an impact on our markets. The swing tonners disappears. That's just the general tightness. Of course it will have an impact. It's very difficult to answer if the CPP markets stay at, let's say, NOK 10,000 per day for an amount, what exact impact will that have? I think as Bjørn showed you, there is a tightness in the specialty tonners no matter what the CPP markets do.
To think that it's going to have a lasting very negative effect on us that CPP markets are very low, I don't think that's the case. It will of course affect the general mood and our ability maybe to have backward contracts and so on.
Yes. From Lars B in DNB. 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, it remains self-funded.
The strategic decision for the Houston terminal, I think our plan is still the same, that we have unused capacity within the land that we haven't used and that we want to build out. We have a greenfield piece of land that we refer to as the point we want to build that out. Of course, the big freeze and the fire we had will delay that. I don't think that it has changed the plan, that it has basically just delayed it. We're following the plan with some modifications to the timeline. What was the question in terms of no external CapEx requirement, so it remains self-funded? I can confirm that that's the way it's set up. We don't expect we need to, as it is today, inject capital into the terminal in Houston.
Thank you. From Anders in Danske Bank Markets. In terms of achieving the cash break-even target, what is the timeline 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 come a long way already, and also with the initiatives that we have 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'll achieve our targets by the end of 2023.
Thank you. Then one question from Amin Dalgas in Siemens Securities. How does the AER improvement of 30% corresponds to the - 20% of consumption target for 2023? Does this mean the target is already reached?
Okay, 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. This says something about the design of the vessel. We cannot mix that with our 30% AER because the AER that shows us the emissions per ton mile or a dead weight mile, that tells us something about how we operate the vessel. These two cannot be compared, basically.
Thank you. Then one from David Batty in SEB. On slide 14, where you compare your fleet to other operators on EVDI, can you provide some more details around the analysis behind this slide?
Yeah. What we did here is that the only open source to emission data for all ships is today in the RightShip database. That's an open source. 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 RightShip. Then we grouped it on the operators. That is how we found out.
Thank you. One question here from Pål Dahl in SpareBank 1 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 million question. Usually in the past, when you build a ship, you knew that it had a 25-30 year economic lifetime. With the existing technology, that might not be the case. I'm not prepared to give you my guess. Because there's so many things that we don't know how fast the energy transition would happen. I think Erik had some interesting comments about how slowly it has actually gone on LNG. We can all be very ambitious for new fuels and new engine types, it might take time.
The longer it takes, the less the impact would be of the discussion about residual value. I can't answer the question, but I can say that it's something that we are concerned with, and as I said, we are trying to limit our exposure to such a residual value going forward in our effort to de-risk the future.
Thank you. 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?
Yeah. As I mentioned in my presentation, it is not expected that Odfjell needs to do a speed reduction on our ships after this regulation gets into force. It's not easy or likely possible for us to predict how this will be for FPS. 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 will be chemical.
Thank you. One more from Pål Dahl of SpareBank 1 Markets. When do you expect to reach your long-term targets, including terminal share activities at 33%?
On that specific question in terms of the terminals and 33%, it 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 fit into the global infrastructure network. It takes sometimes years to develop a single terminal, getting the permits if you're from a greenfield perspective.
You can buy yourself into existing terminals, but I think we prefer not to put a target on it. It also depends in terms of how much capital can we allocate to this and what is going to be that owning model. We're not ready to talk about that plan. 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, Kristian, for the final.
Yeah. Okay, I can only repeat that we are very happy that you have taken the time to participate today. Whether you are 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 answered 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. In the meantime, I just wish everybody stay safe and have a good summer.