OUTLOOK '10: Recovery optimism muted for chem shippers

04 January 2010 22:01  [Source: ICIS news]

2010 chemical shipments should be comparable with 2009HOUSTON (ICIS news)--There seem to be few, if any, wild-eyed optimists concerning the prospects for chemical shipping in 2010.

Some, like Jeff Mavelli at Soundtanker Chartering in Houston, expect the new year to be comparable with 2009 in bottom-line terms. But Mavelli said he did not think the global economic downturn was over or that the shipping business was turning up.

"I think 2010 will be a lot like 2009, with maybe fewer bright spots," Mavelli said.

Mavelli expects less good news next year because of what he described as a "double-whammy" awaiting the shipping industry.

The first blow will be the continuation of the global recession that brought a plunge in chemical shipping freight rates this year, he said. The second hit will come as an armada of new ships ordered in the boom times of 2005-2006 that will be arriving next year and the year after.

"Economies worldwide are still suffering, and there's just too much tonnage coming on line," Mavelli said.

That double blow will magnify the demand dilemma facing the chemical shipping industry - too many ships chasing too few cargoes.

Mavelli said the 30-40% drop in chemical shipping freight rates on most routes this year has put shippers in a bind.

He estimated that the break-even point for a $45m (€32m) chemical tanker is around $15,000/day, but current charter rates leave shippers $4,000-5,000/day short of the break-even point.

Yet there have been recent positive signs, Mavelli noted, particularly in the flurry of activity in November on the US Gulf/Asia route that sparked an uptick in rates.

And US weekly chemical railcar loadings, long considered a bellwether of economic health, reported its seventh consecutive increase for the week ending on 26 December, prompting talk of a possible upswing in industrial demand.

Sammie Mooney, president of the Houston office of Jo Tankers, said she sees no evidence that the coming year will be any better than 2009, although she was optimistic. "We think it will be as good," Mooney said.

Mooney said Jo Tankers' mainstay - contract business on the transatlantic and Africa routes out of the US Gulf - has kept the Houston office making money this year. The greater struggle has been for spot cargoes, she added.

"I would surely call it spotty spot business," Mooney said.

Jo discontinued a Caribbean route in the spring, and in the fall added a route to the east coast of South America. Mooney said a pickup in styrene cargoes for January has been a big boost going into the new year.

"We're just chugging along right now," Mooney said.

($1 = €0.70)

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By: Lane Kelley
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