Chemical tanker freight rates on steady course

Global consultancy Drewry says methanol has been a big driver in the export surge, with US capacity increasing 77% and helping to keep shipping costs stable, for now. US exports to Asia rose 12% and to Europe by 20% last year. (Source: Odfjell SE)

Focus article by Lane Kelley

HOUSTON (ICIS)–A London shipping consultant says that chemical tanker freight rates should remain steady over the medium term because of rising production capacity in key exporting countries, ICIS learned on Thursday.

Global shipping consultancy Drewry based that conclusion on increased liquid chemical exports from the US in the past year and on declining imports.

US trade data released this week show that first-quarter exports of chemical intermediates – such as methanol, styrene, ethylene glycol – jumped 28% compared with Q1 2015, while imports of intermediates dropped by 27% year on year.

Source: US International Trade Commission (ITC)

Drewry noted that methanol has been a big driver of the export surge, with US capacity increasing 77% in 2015 with the addition of around 3.5m tonnes/year of new capacity. 

“As a result, US methanol exports are starting to change the pattern of the long-haul chemical shipping trade,” Drewry said.

Data from the US International Trade Commission (ITC) show that total volume of Q1 methanol exports this year are 21 times greater than in Q1 2015.

Ship broker SPI Marine cited the flurry of methanol shipments from the US to Asia in its latest monthly report.

“It is beginning to sound like a broken record but ethanol and methanol exports from the region continue to drive the market,” SPI said.

The volume of US exports to northeast Asia and Europe rose 12% and 20%, respectively, in 2015, Drewry said, adding that eastbound transatlantic freight rates should rise over the medium term.

Since sanctions on Iran have been lifted, many new projects in the Middle East are expected to come on stream this year. Iran’s 2.3m tonne/year Kaveh methanol plant is expected to start up in the second half of this year. 

US exports to Asia and northwest Europe rose 5% and 23%, respectively, in 2015 and Drewry expects the pace of growth to continue over the next three years, boosting freight rates.

However, on the westbound transpacific route, many large vessels have joined the trade lane, with 38 more vessels on the route in late 2015. Almost half of the ships were of 30,000-40,000 dwt (dead weight tonnes).

“We expect more large vessels to join the eastbound transpacific trade during 2016,” said Hu Qing, Drewry’s lead chemical shipping analyst, in the report, “and as a result we expect freight rates to weaken in the short term but to remain stable over the medium term.”

Source: US International Trade Commission (ITC)

INSET IMAGE: The Bow Dalian. (Source: Odfjell SE)