Chemical shipping rates to remain under pressure for 2016


Chemical shipping rates to remain under pressure for 2016

Chemical tanker freight rates are anticipated to stay under pressure throughout 2016 against the backdrop of low bunker prices and increased newbuilding deliveries, according to shipping consultancy Drewry.

Freight rates for both contracts of affreightment and spot cargoes will be suppressed as some new operators will look to break into the long haul trade routes, encouraged by the low fuel costs and new tonnage availability.

“Shipyards still have the capacity to build more chemical tankers and we expect many ships to be ordered this year for delivery in 2017 and beyond. None of this leaves us optimistic about the future of the chemical tanker industry and our outlook for this segment is quite bleak,” said Hu Qing, Drewry’s lead analyst for Chemical Shipping.

In 2015, a total of 193 ships aggregating 7.4m dwt with an average size of 38,390 dwt hit the water. On the other hand, about 206 ships totalling 3.72m dwt and averaging 18,058 dwt were removed from the fleet. The stainless steel orderbook is at 37% of the number of ships and 41% of the existing deadweight.

Drewry said that looking at the fundamentals, there is a large amount of newbuildings slated to hit the market in 2016, and still many new production projects appear on hold pending a consensus opinion on the long term trend of oil markets.

The lifting of sanctions on Iran brought cheer to the country’s petrochemical industry and it is expected that the volume of trade from Iran to Europe and the Far East will increase.

El Nino brought dry weather across Southeast Asia, affecting the palm oil producing countries of Malaysia and Indonesia by lowering yields and output. With prolonged dry weather caused by the August 2015 drought and the effects of El Nino, production is likely to decline substantially in 2016, Drewry pointed out.

“We expect spot activity out of the Middle East and US Gulf to increase significantly in 2016, but freight rates for both contracts of affreightment and spot cargoes will remain under pressure throughout the year, as there are some new operators looking to break into the long-haul trade routes,” Qing said.

Source from : Seatrade Maritime News