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Chemical and product tankers set for a rough ride
A rather bleak picture of the chemical and product tanker market was painted
Speaking about the product carrier market, ICAP’s tanker expert Simon Chattrabhuti said that the demand level had remained surprisingly high with increasing volumes seen cross trading and in the long haul trades. He put this down to a geographical miss-match of different products and specifications aided by traders taking cargoes in arbitrage trades. Major oil exporters, including some OPEC member states, were now actively importing products. Oil demand was falling in North American, OECD Europe and Pacific regions. Growth forecast for China was weak to negative. India’s heavily subsidised products market was expected to maintain its growth pattern. South America, the Middle East and Africa would be central to product tanker demand growth, Chattrabhuti said. The traditional transatlantic MR trade in gasoline had somewhat diminished on the back of increased domestic ethanol production. However, US ethanol production appeared to have fallen back lately. Falling demand Europe’s gasoline demand fell significantly during the decade and was expected to continue to decline on the back of the recession in the short term and environmental concerns with Europe’s road truck fleet increasingly turning to diesel in the long term. European demand for gasoil/diesel was expected to rise once economic growth returns and there will be a significant flow of US and Asian distillates into Europe, as well as imports from the FSU with a high demand for low sulphur distillates. In a somewhat bizarre scenario, Chattrabhuti said the jet fuel had been shipped out of Europe to Asia in LR2s only to be stored and then shipped back again. Budget airlines had spurred European demand for jet fuel. South Korean demand for naphtha had driven OECD Pacific growth for this product but overall, the OECD Pacific region had seen falls in all major types of refined product demand. In the Middle East, Iran, Iraq and Saudi Arabia were importers of gasoline. Mexico was a large product importer, while Venezuela, Ecuador and Brazil saw further import growth. In Africa, tankers could experience up to a month’s delay in discharging. Indonesia was also an importer and Chattrabhuti said that he expected the intra-Asia trades to grow. China’s increasing refinery capacity was probably good news for VLCCs, but not for product tankers, except for those lifting naphtha. India was the most interesting area where most of the major products were both imported and exported. Refiner Reliance was export orientated as it was not allowed government subsidies for imports, whereas state-owned refineries benefited from subsidies for the domestic market. With the coming on stream of new refineries and the upgrading of some older ones, more clean products were likely to be seen traded, but less fuel oil. However, Chattrabhuti said that overall he expected the market to decline this year on the back of strong fleet growth and weak or negative product tanker demand growth going forward. However, cross-trading and arbitrage might help sustain the market. In the medium to long term, he expected a strong demand growth until refineries hit a balance between regional supply and demand. However, investment in refinery capacity could be delayed due to the ‘credit crunch’. He also gave a fleet breakdown in different size ranges. Aframaxes. There were 770 in service, of which 85 were single hull. The orderbook stood at a further 234 vessels. Of those in service, 163 were coated (LR2s) with another 53 out of the orderbook also coated. Of these, 18 were single hull. Panamaxes. There were 371 in service of which 231 were fully coated and another 105 on order. Single hull vessels totalled 54. MRs (45-55 K). There are 689 in service with another 412 to come. Of those in service only 39 were single hull. Small MRs (27-45 K). There are 920 in service with another 158 on order. Single hull vessels accounted for 236 of the total in service.
Chemical tankers In the chemical tanker sector of over 5,000 dwt, there are 1,684 vessels of 29.8 mill dwt, according to Inge Steensland’s research guru Geir Olafsen. He also said that the orderbook stood at 875 vessels of 16.6 mill dwt, although future delays and cancellations could account for 20% of the vessels on order. He said that Turkish builders could face up to 40% of their orderbook cancelled or delayed. Chemical carrier trades amounted to 165 mill tonnes annually with methanol and liquid chemicals taking the lion’s share at 46% of the total. Palm oil and vegetable oil accounted for another 29%, while acids and caustic soda amounted to 12% of the total tonnage carried. At the bottom of the list came ethanol with 2% and biodiesel with only 1%, he said. Historically, the chemical trades had gown by an average of 6% per year. However, this year the forecast is only about a 3% growth pattern, rising again to 6% next year and 7% for 2011 onward. By 2011, the fleet is expected to have expanded to 39 mill dwt given a scrapping level of 27 years of age, while exports from the Middle East are set to rise, Olafsen thought, resulting in more long haul trades and therefore extra tonne/miles. Rates should be softer this year through 2011, but seasonal strengths were still likely. “There is a downside risk of another 15% drop in rates,” he told the conference. The turning point could come next year with a market balance re-established by 2012-2013, supported by a firmer product tanker market. During the downturn, some chemical tankers could switch to the product trades. More overlap could occur in the transatlantic MR trades, he thought. In the East, the gap is much wider with fewer MR cargoes seen, he concluded. TO
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