Chemical Tanker Market to Recover
The recovery of the chemical tanker market continued into the second quarter as main drivers were strong US exports and healthy volume development throughout the quarter on main trades, said Odfjell SE.
The Clean Petroleum Products (CPP) market weakened which led to a net increase of 20 coated MR's trading chemical/veg-oils during the quarter, hereby increasing supply pressure for chemical tankers towards the end of the quarter, said the company specializing in worldwide seaborne transportation and storage of chemicals and other specialty bulk liquids.
The global chemical tanker order book stands at 6.6% of the current fleet. The global deep-sea fleet based on vessels larger than 18,000 dwt grew by net 6 vessels in 2Q19 as 8 vessels were delivered, and 2 vessels were scrapped. There were eight new orders for core chemical tankers concluded during the quarter, which are the first new orders since July 2018, the company said.
In its latest world economic outlook, IMF projects GDP growth of 3.2% and 3.5% in 2019 and 2020, respectively. IMF highlights downside risk to the forecast, as further trade tensions could dent sentiment and slow investments further.
Chemical end-user demand is closely related to GDP growth, and a global recession is considered a main risk that could affect the chemical tanker market recovery, it said.
The start-up and increased utilization of new liquid chemical facilities is progressing as forecasted and the pace of new volumes coming on stream are expected to accelerate from the end of the third quarter and towards June 2020 and improve the utilization of the chemical tanker fleet.
Geopolitical tensions increased in the Middle East, a major export area for liquid chemicals. Heightened uncertainty has led to less spot cargoes quoted in the market, while COA volumes remains stable. It's still to early to conclude on the outcome of the tensions, but we expect activity to pick up towards the end of the third quarter.
The CPP market weakened through the quarter due to an extended refinery maintenance season. This led to increased competition from swing tonnage during the quarter. It's expected that supply growth from swing tonnage will be reduced again when IMO 2020 preparations ramp up in 4Q19.
Net fleet growth for the chemical tanker order-book (core & swing) is projected to 1.4% for 2020 before adjusting for potential impact from reduced swing tonnage and slippage.
"We forecast chemical tanker supply growth of 2% and chemical tanker demand of 5% on average per year through 2021," said Odfjell.