Sub-Saharan Africa Flexitank Market Growing


Sub-Saharan Africa Flexitank Market Growing

When margins are tight and currency is scarce, base oil traders often look for ways to cut costs. One place to start is with logistics. EmekaUmejeilooks at the gaining popularity of flexitanks, novel liquid transport containers that ship small volumes of products across sub-Saharan Africa.

The viability of flexitanks for transporting base oils and other liquids is becoming ever more attractive, and many players in the global lubricants industry agree that using them saves operational costs and raises profits. This is particularly the case in Africa, where logistics challenges have resulted in high freight costs and have adversely impacted intra-African trade.

The high cost of bringing large liquid cargoes into Africa in bulk tankers from limited sources has discouraged some smaller base oil traders from upping import volumes. Many see flexitanks as a way to overcome the economic and logistical obstacles. They offer other advantages over other intermediate liquid carries such as isotanks and metal drums.

Developed by the United States military in the 1960s to transport water, flexitanks are large, layered polyethylene bladders that transport liquids inside standard 20-foot shipping containers. They can hold up to 24,000 liters of liquid and when empty can be rolled up to extract the remnants. This is several thousand liters more than drums occupying the same space. They also do not need to be cleaned out like rigid isotanks, which are returned empty at the expense of the buyer.

Small but Growing

According to a report by the Container Owners Association, an international freight trade organization, the use of flexitanks to transport nonhazardous bulk liquids has grown substantially in recent years. This has been brought about by the development of new manufacturing materials and processes that have improved their reliability and cost, the report said.

An estimated 984,000 flexitanks were transported globally in 2015, growing to 1.4 million units in 2016, according to data from various sources. Economy analysis company IHS Global Insights forecast that the global flexitank market will see compound annual growth of 18.6 percent between 2016 and 2024 and could reach a value of more than U.S. $6 billion.

Valerie Guede, regional manager for West Africa at Trans Ocean Bulk Logistics Ltd., a United Kingdom-based flexitank logistics provider, told LubesnGreases that it is very difficult to estimate the size of the flexitank market in sub-Saharan Africa and noted that the region represents less than 2 percent of the global total. The conversion rate [to flexitanks] is very difficult to evaluate in instances when a manufacturer will switch from importing drums to flexitanks. It is a very immature market, Guede said.

However, she pointed out the use of flexitanks is growing, with Nigeria the regions largest flexitank user. A flexitank can be used by [many] industries … it can be mayonnaise manufacturers or drink manufacturers. So the more industries you have, the more opportunity you have to shift flexibags from an import perspective.

Flexitanks gained popularity in Nigeria during a currency crisis two years ago that caused U.S. dollars to become scarce. This forced many independent blenders to find ways to avoid highly inflated prices for imported bulk base oil, and flexitanks were a good solution.

When forex became scarce, many middle players automatically shifted to flexitanks, and it worked for many people because it costs less and it has helped a lot of local blenders to enter into the base oil market, a base oil trader told LubesnGreases under the condition of anonymity.

Seyi Akerele, business development manager for lubricant supplier Trendlarge Nigeria Ltd., estimated that some 2,000 flexitanks are shipped into Nigeria monthly, mostly importing base oils. Using flexitanks allows blenders to import smaller quantities. It helps to minimize cost and makes base oil competitive against the bulk buyers. When you bring in bulk, they charge $120 per metric ton, but for a flexi it is $95, said Akerele.

Similar circumstances may have spurred the use of flexitanks in South Africa. Cliff Classen, managing director of base oils distributor Orbichem in South Africa, said that with the advent of flexitanks came the realization that a product could be landed for almost the same price as bulk shipment. The difference between bulk and flexitanks was $30, but the cost of freighting bulk product was high, Classen explained.

Flexitanks can be transported point to point, from the producer to the buyer, without having to be decanted into storage tanks at the port of entry then transferred to intermediate bulk carriers or drums, which increases freight cost, paperwork and handling processes at the end point. Blenders can source base oils from anywhere in the world, not just local suppliers.

The cost on the flexi side was lower because you had so many different choices. But for bulk, you could only import from certain refineries. And for the customers it was easy to switch from local supply to import supply, said Classen.

He emphasized that the flexitank market in South Africa has gained traction and continues to see growth. There are more flexitank imports coming into South Africa now than ever before. Even for us, we were importers of both but we found that it makes more sense to bring in flexi and then decant, said Classen. It is difficult to get bulk shipment below 1,000 tons. So a flexitank gives you that flexibility.

Flexitanks typically contain 20 tons of liquid, allowing for a staggered supply of products to the buyer, reduced storage requirements and greater control over expenditure.

Mervin Naidu, sales manager for specialty chemicals distribution company Unichem in South Africa, agreed that flexitanks are more business friendly than bulk shipments. A lot of independent blenders are now bringing in their own products, and they are landing products in South Africa cheaper than what some of the suppliers in South Africa are selling. And that goes straight into their bottom line.

Port congestion, long customs processes and complicated documentation at some African ports can delay the unloading of bulk liquids. This racks up demurrage fees, paid by the buyers while ships wait to be unloaded at berth that can be equivalent to the value of the cargo itself.

The importer doesnt know whether to abandon the cargo or pay the demurrage and lose the value of the cargo, said Guede.

The advantage of flexitanks is that demurrage begins once the container has left the vessel after a variable amount of free time depending on the port rules.

Despite them being an economical alternative to bulk shipments, especially for smaller players, there is an environmental cost that African buyers struggle with – either recycling or destroying the bags after use. Unlike isotanks, metal drums or intermediate bulk carriers, flexitanks are single use.

While there are some recycling facilities in Cote dIvoire, Ghana and Senegal, there is none in Nigeria, the largest market for these products. They have PET recycling in Nigeria, which you can find very easily, but the specific plastic of the bag … cannot be recycled by the same person who recycles PET because they are not the same plastic, said Guede.

Flexi Future

Guede anticipates an increase in cross-continental traffic as economies in sub-Saharan Africa diversify. Intra-Africa traffic will rise in the next 10 years a lot because after the crude oil crisis in 2014-15, countries that were very dependent on oil have realized that they have got to diversify their economies, and the way they can do it is by building their own local manufacturing … and catering to their own countries.

There is little doubt that the flexitank market in sub-Saharan Africa will continue to see growth, especially in the face of rising crude oil prices that will result in an increase in business activities in the region. Nigeria, a dominant regional economy, has also emerged from recession, and all these factors combined should stimulate growth in the use of flexitanks.

Related Topics

Africa    Flexi Tanks    Packaging    Packaging Containers    Region