Bahri Annual Report-2017

Bahri Chemicals 2 Strategic Business Units 3 Annual Report 2017 64

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One of our major challenges in 2017 was the increase in bunker prices, which added significantly to our costs. Overall, the bunker price differential between 2017 and 2016 represented an average increase of around US$91 per metric tonne (US$340 per metric tonne average in 2017 compared Challenges

with US$249 per metric tonne average in 2016). The steady supply of new tonnage entering the market has also put pressure on freight rates during the year.

Fleet strategy

Our vessels continue to maintain their reputation for safety. They are among the safest high-quality chemical tankers in the world today. Our owned fleet of 31 vessels includes:

Fuel saving initiatives

asset classes – including stainless steel ships – which will support our clients’ logistics needs across a broader product range with different transportation requirements. Stainless steel vessels are ideally suited for the transportation of specialty and corrosive chemicals as well as a wide range of other products.

The need for continued growth is related to the increasing logistics needs of our close partners SABIC, Saudi Aramco and other leading regional producers together with what we see as healthy demand dynamics across our growing global client base.

• three high-specifications stainless steel vessels (on bareboat charter); • six IMO2 MR coated chemical tankers, about 46k DWT each, commercially operated by Bahri Chemicals and are on-time charter to our largest client and partner the Saudi Basic Industries Corporation (SABIC); • 16 IMO2 MR coated chemical tankers, about 46k DWT each (operated in the spot fleet); • five MR product tankers, about 50k DWT each (on-time charter to Saudi Aramco Trading); and • one IMO LR chemical tanker, about 83k DWT (on-time charter to SABIC, operationally managed by Bahri Chemicals). We are targeting continued growth of our IMO2 MR fleet in tandem with growing our cargo base. Additionally, we are also diversifying into different

Fuel savings represented an average reduction in daily bunker consumption of about five metric tonnes per ship. We achieved this through consistent efforts over the past several years to lower fuel consumption through a wide range of initiatives including:

• Close follow-up from operations ensuring optimal speed at all times; • Weather routing software helping vessels get shore assistance on most efficient routing; • New hull coating helping to • New tank coatings helping to decrease time spent on cleaning between voyages, resulting in time and bunker savings; and • Investment in various fuel saving equipment on the ships.

We will continue to explore strategic partnerships with a view to grow and diversify our fleet. Expanding our global presence and broadening our product offering remain strategic priorities and we will continue to invest in assets, initiatives and programs to ensure cost-efficient and top-quality cost efficient services for our clients. Looking forward

Scale and optimization

The market’s recovery in the short to medium term will depend on its ability to absorb the supply side growth we have witnessed over the last few years. With the demand side remaining healthy and new ship orders significantly reduced, there is reason for optimism in 2018-2019 and beyond.

Our strong performance compared with industry peers has been achieved by focusing on improving scale and asset utilization. We improved asset utilization by securing a strong foothold in other segments such as CPP and vegetable oils, enabling us to return the vessels to the region in a laden condition.

Bahri Chemicals is also increasing its global presence by opening more commercial representation outside of the Middle East. We have already established our representative office in the Americas and plan to set up our presence in Asia in 2018.

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