WP_Post Object ( [ID] => 15996 [post_author] => 34 [post_date] => 2020-02-04 09:00:34 [post_date_gmt] => 2020-02-04 09:00:34 [post_content] =>

The chemical tanker market has had what might be termed a desultory year, with recent earnings releases largely flat at best, despite the emergence of new trade flows and increasing demand for vegoils and fats transport. The lack of any significant upward impact on revenues for tanker operators may be due to an overall lack of confidence within the sectors they serve, as political and economic uncertainties have led to a decided note of caution.

Nonetheless, the fundamentals are sound. The chemical industry continues to expand, most especially in emerging economies, and demand for both chemicals and for vegoils remains strong. Furthermore, the arrival of the ‘IMO 2020’ rule on sulphur oxide emissions from all ships, together with new rules on ballast water management, often encouraged owners of older tonnage to scrap their ships during the past two years, rather than invest in bringing them up to standard to meet the new rules. Allied to comparatively restricted fleet growth through newbuildings, this has brought the market back towards a more balanced position, even if the early part of 2020 has seen some contracting activity at the yards.

As a result of those factor, broker Banchero Costa calculates, fleet growth over the course of 2019 was expected to come out at 2 per cent in the sub-30,000 dwt segment, compared to 3 per cent in 2018, although this is mostly concentrated in the 20,000 to 30,000 dwt range. It forecasts another 2 per cent growth in 2020 but no growth at all in 2021. These figures compare favourably with the 6.4 per cent growth recorded in the fleet in 2018, according to Barry Rogliano Salles.

PRICES AND DEMAND

One indicator of the lack of intense interest in expanding the chemical tanker fleet can be seen in newbuilding prices, which picked up a little in 2019 but are still well below the levels seen ten years earlier. Prices then were still on a high after the rush of newbuilding contracting seen up until the 2007/08 crash; those newbuildings were still being delivered after demand had collapsed, leading to an oversupply position that badly affected earnings through much of the decade beginning in 2010 and that is only now beginning to unwind.

Banchero Costa also points to rising import demand for certain products. For instance, it says that methanol imports into China increased tenfold in the decade to 2018 but growth has slowed, though demand increases in India have taken over. Nevertheless, the broker also notes that both countries have drawn much of their methanol imports from Iran and US sanctions may have an impact on the volumes that they are willing to take from this source – there again, if they buy from Trinidad instead, it will add significantly to tonne-mile demand. The US is also beginning to export increasing volumes of methanol, which jumped by nearly 60 per cent in 2018 alone. Perhaps it is no surprise that some vessel owners are beginning to look at methanol as a potential fuel for their ships, with Proman Stena Bulk last year lining up a two-ship order for 50,000-dwt methanol fuelled tankers at Guangzhou Shipyard.

WHAT’S BEHIND IT ALL

So while the fundamentals appear to point to a bullish outlook, external factors are hampering development. Speaking this past November at the Tanker Shipping & Trade Conference, consultant Charles Lawrie had this to say: “I do not recall a period in time when we have had so many external pressures on the market. It has been barely noticed outside of the chemical tanker trades, but there is a hugely influential trade dispute between South Korea and Japan taking place at the moment. Far more talked about is the US – China Trade War, and then there is the series of tanker incidents and threats to trade in the Middle East. Not to mention Venezuela and Libya. The word ‘uncertainty’ underplays the geopolitical outlook.”

Furthermore, while there are some encouraging signs in terms of import demand – not only in China and India but also South Korea and Taiwan – these are being accompanied by falling import demand in other countries, not least the US (as a result of increasing domestic production) and Japan.

But from the supply side, Lawrie pointed out that what is holding back newbuilding activity is not so much questions of demand but questions about what the ships of tomorrow will need to look like to meet environmental regulations. Owners are asking what propulsion systems will be needed to meet the 2030 deadline for reducing carbon intensity and the 2050 target for a net-zero carbon shipping industry. Bearing in mind that chemical tankers are usually expected to trade for at least 25 years, those being built today need to meet the regulations of tomorrow.

[post_title] => Market: Take a breather [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => market-take-a-breather [to_ping] => [pinged] => [post_modified] => 2020-02-04 09:00:35 [post_modified_gmt] => 2020-02-04 09:00:35 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.hcblive.com/?p=15996 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )