Clean Harbors retains UMO customers

Market: Oil products
26/02/15

North American environmental service provider Clean Harbors said that it has not lost customers because of its new zero-pay and charge-for-oil service fee for the collection of used motor oil (UMO) the company implemented late last year.

Clean Harbors recently made major changes to its oil recycling and refining business to regain profitability in a low-priced base oils environment. In mid-December its re-refining unit, Safety-Kleen, stopped paying for the used engine and industrial oils that it collects and recycles into base oils.

Base oil prices have sustained historic drops since Clean Harbors acquired Safety-Kleen in December 2012. Group II N100 prices have declined 50pc since mid-2012 to $2.04/USG in February 2015, according to Argus pricing. The company's Group II posted prices dropped $1/USG in the second half of the year, and 50¢/USG in December alone to $2.45/USG.

The steep decline in base oil prices in the second half of 2014 reduced the value of the re-refiner's inventory and made it less profitable for it to sell base oils. Safety-Kleen is now transitioning away from selling base oils to instead focusing on boosting sales of its higher-valued finished lubricants. Blended products made up 38pc of volumes produced in the fourth quarter, up from 34pc in the third quarter and 33pc in the fourth-quarter in 2013.

Clean Harbor's oil re-refining and recycling segment reported a fourth quarter adjusted EBITDA of $2.3mn, down from $10.3mn the same time a year earlier. The segment's revenue for the quarter dropped to $74mn, down from $84.5mn in the same quarter last year. Sales of re-refined products accounted for 10pc of total fourth-quarter revenue, down 25pc from 2013.

Clean Harbor surpassed its fourth-quarter earnings guidance because of significant growth in its waste disposal segments. The company reported a profit of $27.4mn for the quarter, up from $26.8mn in the same quarter of 2013.

The company has continued to seek more feedstock supply for its re-refining operations, despite the drop in prices. It agreed earlier this month to buy Thermo Fluids, one of the largest collectors of used motor oil in the western US, from Nuverra Environmental Solutions for $85mn. Clean Harbors said the acquisition will add about 50mn gallons of used oil to Safety-Kleen's recycling and re-refining system. The deal will close by early March.

The increased used oil volumes will be re-refined into base oils, which is blended with additives to make finished lubricants, such as engine oils, and other refined products, such as diesel.

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