03 December 2009 23:00 [Source: ICIS news]
NEW YORK (ICIS news)--The global overcapacity in the chemical tanker shipping market may eventually force some shipowners out of business, the president of US brokerage Sound Tanker Chartering said on Thursday.
The market has been hit by the double blow of an economic downturn at the same time as new ships that were ordered in boom times of 2005-2006 are arriving on the scene, Jeff Mavelli told the ICIS Pan-American Base Oils & Lubricants Conference in New York.
"I think there has to be a dramatic turnaround in the world economy for things to get better" in the shipping market, Mavelli said.
He did not identify which of the shipping companies were most at risk, but painted a grim picture of the losses being incurred.
A $45m (€30m) chemical tanker would depreciate over 20 years at a rate of around $8,000/day, he said.
When the cost of operating and insuring the vessel is added, the total break-even point is around $15,000/day – well above current charter rates.
"Everyone is bleeding $4,000-5,000 a day," Mavelli said.
Although there would not likely be any significant increase in freight rates over the next year at least, Mavelli said few ships would be taken out of service.
The process of laying-up a ship and then returning it to service is expensive, and to make it worthwhile the owner would have to make a conscious decision to commit to one or two years of inactivity, he said.
Mavelli noted that some Greek shipowners who have deep financial reserves after the strong run in the dry bulk market in recent years are willing to keep chemical tankers idle for two or three weeks at a time, rather than submit to reduced rates.
($1 = €0.66)
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