GIBSON’S GRAPEVINE

13 March 2006 00:00  [Source: ICB]

A shipshape market – or oversupplied?

Should shipping markets be worried about overbuilding the newbuilds? Statistics show that, globally, fleets will grow by 6%/year over the next three years, while tanker demand is unlikely to climb above 4%/year. But a strong market for freight is expected through to 2008 and most contracts of affreightment (COAs) and time- charter rates for 2006 are expected to be renewed at 15-30% above 2005 levels.

China is, of course, driving demand in oil and chemical sectors. But with many of these products coming out of the Middle East, it is there that the shortage may be most noted (unless President Bush’s realisation that the US is addicted to oil really does result in fewer imports from the Middle East).

Over the 2005-10 period, 23m tonne/year of ethylene capacity was planned for the Middle East. Now 16m is actually expected onstream by 2010, according to consultancy Nexant. Olefins and vinyl chloride monomer will see more competition for semi-refrigerated (SR) long-haul tankers from LPG markets. Ammonia markets will also take up a larger proportion of SR tankers. The newbuilds, which could service ethylene markets, will be ready for 2006, but many of these are said to be already committed.

Some larger chemical and oil companies in the Middle East are choosing to build their own ships. Saudi Arabia’s National Shipping has recently decided to double its oil and tanker fleet over the next five years. Ten chemical carriers are under construction and due for delivery from early 2006 to 2008. National Iranian Oil Tanker Co said last year that it plans to order around 35 vessels to be built by 2010, including 10 liquefied natural gas carriers.

Freight rates need to remain high over the coming years to cover higher bunker costs and help pay for the newbuilds. And ship owners need to hope that China will remain hungry for imports.

China aromatics imports disappoint

Here come some depressing stats if you are a ship owner. Imports of most aromatics into China fell in January by more than half compared with the same period a year earlier. China Customs statistics show that benzene imports fell by more than half to 10 210 tonne in January and toluene imports at 21 832 tonne were one-fifth of the January 2005 import level. Mixed xylenes fell 98% to 159 tonne. Paraxylene was the only aromatic to buck the trend, rising 55% to 128 956 tonne.

But imports of polymers (except for polyvinyl chloride and polystyrene which fell 24% and 13%/year, respectively) rose by between 4% and 29%. Polypropylene imports saw the largest increase rising 29% to 238 772 tonne, backed up by propylene imports, which more than doubled to 19 794 tonne. Ethylene and butadiene imports fell by 31% and 18% respectively.

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