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Tuesday, December 12, 2017

Chemical tanker market improving

According to an article in Fairplay Weekly of 6 January 2005, there are reasons to be optimistic about the prospects in the chemical tanker market. Chemical tanker freight rates reached high levels during the second half of 2004 with levels higher than the previous market booms in 1991 and 1995 and not seen since 1979. 

As in the tanker, container and dry bulk markets, it is Chinese demand for chemicals and all other types of raw materials that has been the main driver behind the upturn. 

Looking at overall demand, volumes of seaborne products such as chemicals and vegoils have increased steadily over the last two decades, with demand for chemicals increasing 4-6% over the last couple of years. 

An INTERTANKO update of chemical tanker freight rates is available on our website at the following link. The graph below clearly shows the upward development in the chemical tanker market.

Also, deliveries of chemical tankers have been modest and below replacement levels, particularly during the first half of the 1990s, reflecting a similar trend to that of the oil tanker market, but more pronounced. Since nearly all sectors of the shipping markets have been good for the last two years, newbuilding prices have increased making it difficult for owners in the chemical tanker market to place orders even against bona fide demand. Tougher vetting standards and regulations have also had an impact and it is now more difficult to use older tankers. 

INTERTANKO recorded 25 chemical or chemical/oil tankers sold for decommissioning in 2004, totalling 416,527 dwt and with an average age of 26.7 years. Most of these tankers were small - 12 were below 10,000 dwt, 5 were 17,000 -26,000 dwt and 8 were 28,000 -34,000 dwt. 

According to Clarkson, some 2.53 m dwt of chemical tankers were contracted in January to November 2004, the highest ever. (We have recorded 8 chem/oil tankers of 152,100 dwt contracted in December.).

Chemical tanker contracting by year 10-60,000 dwt

 

Year

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004*

M dwt

0.2

0.4

1.3

1.2

2.1

2.2

1.3

1.2

1.2

1.4

1.6

2.0

2.5

No

10

14

49

67

111

128

64

57

60

51

70

93

121

*2004: 11 months

Source: Clarkson Shipyard Monitor

 

Seaborne chemicals and other products carried in chemical parcel tankers are likely to continue to grow in volume, according to most forecasts, although tonne-mile development is less clear-cut. Several new chemical plants are scheduled to come on stream over the next two years in Asia, particularly in China. These will have a negative impact on the tonne-mile demand as they are situated near consumption areas. They could add some volume to the inter-Asian trade, but not as much as one would think, as they will remove volume from other parts of this trade.  

On the other hand, chemical plant expansions in the Middle East are likely to have a positive effect on tonne-mile demand as their output is designed for export to distant consumption areas. Another wild card that might boost tonne-miles is a possible reversal of the trade. Should the Chinese economy cool while the U.S. and European economies continue to expand, chemicals may find their way from China to the U.S. and Europe

The article also notes the recent changes in the IMO rules regarding MARPOL Annex II and the IBC Code. As of the 1st January 2007, vegoils, will have to be carried in tankers classified as IMO II. The IMO compromise solution does however allow veg oils to be carried on an IMO Type III ship, providing that the ship complies with double side protection of 760 mm; and double bottom tanks or spaces shall be arranged such that the distance between the bottom of the cargo tanks and the moulded line of the bottom shell plating measured at right angles to the bottom shell plating is not less than B/15 (m) or 2.0 m at the centreline, whichever is the lesser. The minimum distance shall be 1.0 metre.  

This compromise does increase the amount of tonnage available to carry these products and provides the vegoil market with access to a vast number of modern chemical tankers which can meet these requirements. The IMO has showed flexibility in response to concern that there could be a tonnage shortage if veg oils were only allowed to be carried in IMO ship type II. 

The changes to the IBC Code will require veg oils to be carried under a Certificate Of Fitness 
If you have any queries please contact Erik Ranheim /Jan Svenne