OUTLOOK ’14: Shipping markets showing signs of recovery

By Sarah Trinder and Lane Kelley

LONDON (ICIS)–Although the global shipping markets have been sluggish during parts of 2013, some analysts say that this year has in fact seen an improvement in freight rates.

This is expected to continue in 2014, with RS Platou, a ship and offshore brokerage and investment bank company, of the opinion that the chemical tanker market remains in a steady, cyclical recovery.

“2013 has turned out to be a much better year for chemical tankers. At +13% year on year, TCE [time charter equivalent] rates are looking to average at the highest level since 2009,” brokerage company RS Platou said.

“However, rates are still a far cry from the peak levels seen during 2005-2007,” it added.

“Based on our supply-demand forecasts, we do not expect rates to reach the levels seen during 2005-2007 any time soon but rather improve at a steady pace of 6-7% per year,” it said.

The outlook for chemical shipping in the Americas in 2014 in particular, appears more optimistic than it has been in years, largely because of what brokers and shipowners say are unmistakable signs of a turnaround in progress.

US-based broker Netco mentioned a few of the signs in one of its last monthly reports for 2013, noting that nearly all freight rates in the western hemisphere’s major trade lanes were higher than six months previously and that spot tonnage was getting scarce.

Netco said the strength of the year-end rally that lasted at least four months posed the question of whether it was the beginning of a more lasting trend or just a seasonal spike.

Another US broker said the year-end rally put shipowners in a generally hopeful mood about the new year.

“They think a lot of trade lanes are going to improve, but they say it’s going to be especially a stronger market to the Far East,” he said.

Brokers say the US-Asia route has been the main driver behind improvement in the seaborne chemical market this year, with higher vessel demand because of increased Chinese imports from the US.

RS Platou said one shipowner maintained there were higher volumes on return voyages from Asia to the US and Europe.

Some shipping sources say the problem that has plagued the transport of waterborne chemicals for years – of too many ships chasing too few cargoes – will be swallowed up by a tidal wave of US exports as the shale gas revolution converges on a shrinking chemical vessel fleet.

Not everyone agrees. RS Platou called the US shale gas advantage “a slight positive but no game changer.” The broker said the driving force for chemical tanker demand remains the global economy, higher consumer demand and industrial production.

Furthermore, some European shipping sources believe shale gas has contributed to slower activity along the transatlantic westbound route for the foreseeable future.

“The Americans are producing too much from shale gas – Europe has nothing to sell them any more,” one ship operator said.

With the economic climate in the eurozone still experiencing difficulty in some areas, shipping activity is expected to remain at low levels.

“The European economy is still languishing so it should not be a surprise that market activity is slow. While GDP growth is expected to improve somewhat in 2014, the chemical sector needs a jump start before a meaningful recovery can take place in this trade lane,” according to SPI Marine, an independent service provider.

“Everybody is optimistic about next year – I don’t see a big change until 2015-2016. I think it will take more than 12 months for [European] consumption to improve,” one broker said.