Executive Briefings

Rates Expected to Continue to Drop This Year in Chemical Tanker Shipping

Chemical tanker shipping faces another challenging year of falling freight rates in 2015, but the trade is expected to recover next year, according to the latest edition of the Chemical Forecaster, published by global shipping consultancy Drewry.

Rates Expected to Continue to Drop This Year in Chemical Tanker Shipping

Seaborne trade in chemicals and associated products fell by 1.2 percent in volume terms in 2014. This decrease can be attributed to the overall weakness in the Chinese and European economies in 2014; however, with China accounting for approximately one third of global organic chemical imports, particular emphasis is placed on the fall in Chinese demand for chemicals as a major factor impacting the global market.

"Uncertainty over the economic outlook and the recent fall in oil prices and its impact on plans for new petrochemical plants in the short term are likely to restrain trade growth in 2015," says Nazneen Fatima, lead analyst for chemical shipping at Drewry.

On the supply side, while the rate of new ordering in the chemical shipping sector has moderated, the total chemical capable fleet grew by 4.4 percent in 2014 and with a current orderbook of 10.2 million dwt, further increases in supply will take place in 2015. When allowances are made for vessel scrapping and the loss of IMO certificates of fitness, the net increase in the size of the chemical fleet in 2015 is likely to be in the order of 7 percent, according to Drewry estimates.

Given that changes in vessel demand and supply are likely to be out of line for much of the year, pressure will remain on rates. ‘‘Our chemical freight rate index dropped for much of 2014, before a brief rally at the year end. Our expectation is that average rates for 2015 will be lower than average rates in 2014. But in 2016 the market will begin to recover as supply growth moderates,’’ Fatima said.

Source: Drewry

Seaborne trade in chemicals and associated products fell by 1.2 percent in volume terms in 2014. This decrease can be attributed to the overall weakness in the Chinese and European economies in 2014; however, with China accounting for approximately one third of global organic chemical imports, particular emphasis is placed on the fall in Chinese demand for chemicals as a major factor impacting the global market.

"Uncertainty over the economic outlook and the recent fall in oil prices and its impact on plans for new petrochemical plants in the short term are likely to restrain trade growth in 2015," says Nazneen Fatima, lead analyst for chemical shipping at Drewry.

On the supply side, while the rate of new ordering in the chemical shipping sector has moderated, the total chemical capable fleet grew by 4.4 percent in 2014 and with a current orderbook of 10.2 million dwt, further increases in supply will take place in 2015. When allowances are made for vessel scrapping and the loss of IMO certificates of fitness, the net increase in the size of the chemical fleet in 2015 is likely to be in the order of 7 percent, according to Drewry estimates.

Given that changes in vessel demand and supply are likely to be out of line for much of the year, pressure will remain on rates. ‘‘Our chemical freight rate index dropped for much of 2014, before a brief rally at the year end. Our expectation is that average rates for 2015 will be lower than average rates in 2014. But in 2016 the market will begin to recover as supply growth moderates,’’ Fatima said.

Source: Drewry

Rates Expected to Continue to Drop This Year in Chemical Tanker Shipping