24 December 2010 15:00 [Source: ICIS news]
By Lane Kelley
HOUSTON (ICIS)--The prevailing outlook for 2011 among observers in the Americas' chemical shipping business is that while more prosperous times may still be more than a year away, the worst times are over.
Prosperity sounds a little more distant on the other side of the Atlantic Ocean, but in the Americas the prevailing narrative is upbeat.
"The environment is getting better," said Joe Pyne, chief executive of Kirby, the largest US barge company, in a recent conference call. "There's a little less uncertainty out there today."
Another sign came from a Houston chemical broker, who said that two large chemical shipping firms had raised their contract (COA) rates by 10% for 2011. The broker cited the companies as proof that shippers are counting on an upswing.
So is the Worldscale Association, which sets global shipping rates. Its rates for 2011 are set to rise 17-20% on the major tanker trades, according to leading shipping consultant McQuilling Services.
And it is no coincidence that rates are expected to rise at a time when the transport of chemicals made in the US - the world's largest producer - is about to reach a new all-time high.
The previous high point came in July 2008, when the value of US-made chemicals reached $61bn (€ 46.4bn), then plummeted with the dollar as the global recession took hold. In October 2010, the total value of US-made chemicals totalled $60bn.
Even so, some uncertainty remains for the business. The largest shipper, Stolt, said in its most-recent quarterly report that "we see no signs of a sustainable improvement in our tanker market in the near term."
Much of the pessimism stems from a too-slow improvement in freight rates.
Spot rates for the week ending 17 December were up about 6% from the same week in 2009, as assessed by the ICIS Americas shipping report.
Not all shippers are seeing the same single-digit percentage increases, however. Norwegian chemical shipper Eitzen said freight revenue from its 83-vessel fleet declined 3% in the third quarter this year to $96.1m compared with $99.2m in the same period of 2009.
Some of the gloom also comes from the continuing tonnage overhang. In an already-crowded European market, the addition of newly-built chemical tankers this year threatens to become even greater in 2011.
While the number of new tankers ordered in 2010 fell sharply, many owners still are expected to take delivery next year of vessels ordered during the pre-2009 boom years.
Many fear the increase in capacity will undercut any possibility for higher freight rates. European owners worry much more about tanker oversupply than about the prospect of weak demand for chemicals and oil products.
"There are too many ships, rather than a lack of cargoes," a Paris-based shipbroker said.
European freight rates have shown little or no improvement in 2010, and at times have failed to cover basic running expenses and the cost of bunker fuel. Some European shipowners have refinanced vessels under terms allowing them to pay interest only, deferring total repayment until margins improve.
A shipbroker in London said the overcapacity problem more than likely would make 2011 not much different than 2010.
"I can’t see any sign of improvement," the broker said.
Additional reporting by James Mills
($1 = €0.76)
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