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bancosta blue studies – volume WET 2018/#16 Chemical Tanker Outlook (an analysis of the IMO I, IMO II and IMO III tanker fleet) August 2018 banchero costa research www.bancosta.com ; [email protected] banchero costa
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Page 1: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

banchero costa

Aug 2018 – Chemical Tanker Outlook 1

bancosta blue studies – volume WET 2018/#16

Chemical Tanker Outlook (an analysis of the IMO I, IMO II and IMO III tanker fleet)

August 2018

banchero costa research

www.bancosta.com ; [email protected]

banchero costa

banchero costa

Page 2: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

banchero costa

Aug 2018 – Chemical Tanker Outlook 2

1. The Chemical Sector page 3

2. Fleet Development page 8

3. Shipbuilding Trends page 23

4. Detailed Age Profiles page 35

5. The Demand Side page 40

6. Charter and S&P Market page 49

7. Final Words page 53

Index

Page 3: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

banchero costa

Aug 2018 – Chemical Tanker Outlook 3

The Chemical Sector (Introduction & Definitions)

Page 4: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

banchero costa

Aug 2018 – Chemical Tanker Outlook 4

A Chemical Tanker is a specialized type of tanker ship designed to carry liquid chemicals and vegetable oils in bulk. They are distinguished from other tankers due to the fact that the cargoes they carry require special handling and storage procedures.

Chemical cargoes are usually shipped in small parcels of about 1,000-6,000 tonnes. Due to economic reasons different cargo parcels are often combined on the same vessel. Therefore larger chemical tankers usually have numerous tanks (often more than 20) with separate loading/discharging equipment each capable of carrying a different chemical product without risk of mixing. Tankers with numerous separate tanks are usually referred to as ‘parcel’ tankers.

All chemical cargoes are classified according to their carriage requirements as defined in the International Bulk Chemical Code. International regulations impose strict rules as to the design of the ship used, equipment on board and handling procedures according to the requirements of each specific cargo type.

Broadly speaking, liquid chemical cargoes are assigned IMO (International Maritime Organisation) grades depending on their level of flammability, toxicity, corrosiveness and reactivity. These grades are on a scale of I, II and III from more hazardous to less. Tankers can be certified for the carriage of cargoes of a certain grade on the basis of required technical features such as appropriate tank coating/material and the location of the cargo tanks on the ship.

Type I cargoes, which are relatively rare, are not biodegradable and if released in the sea would build up in marine organisms. Parcel tanks approved for the carriage of these chemicals must have a double skin and be located not less than one-fifth of the ship’s breadth from the ship’s sides measured at the water line. Given that chemical cargoes are often particularly hazardous, tanks of chemical tankers are either coated with specialized coatings such as; phenolic epoxy, zinc paint or marineline; or made or covered of stainless steel.

Page 5: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 5

The coating or tank material again determines the type of cargo the ship can carry – more demanding cargoes such as phosphorus or acetic acid require stainless steel tanks or marineline coating, corrosive acids such as phosphoric acid are generally limited to stainless steel only, whilst easier cargoes such as vegetable oils or ethanol can easily be carried in epoxy coated tanks.

Vegetable oils generally require IMO II certification but epoxy coating is sufficient, and numerous ships are designed specifically for these trades, where parcel sizes are also often quite large. Triangulations with clean products are possible. Newbuilding non-IMO II MR tankers also can carry vegoils as their first ever cargo.

On the other hand, the standard for ‘sophisticated’ parcel chemical tankers is to be fully ST/ST. This allows not only for corrosion protection but in particular also allows for easy cleaning and deodorizing of the tanks to very high temperatures, and no risk of absorption by previous cargoes, in order to ensure cargo purity.

Marineline coating has most of the properties of stainless steel at a potentially lower cost. Being particularly hard and slippery, this coating is very easy to clean to a high standard.

It’s been a popular option for newbuilding in recent years, but remains a relatively new technology with a limited track record.

The general rules are: Epoxy coatings possess a good resistance against alkalis, seawater, wine, vegetable oils, crude oils, gas oils, lube oils, jet fuels, gasoline and also weak acids (as in free fatty acids in vegetable oils, but acid value should not exceed 20-40). Epoxy has limited resistance against aromatic hydrocarbons ("solvents" such as benzene, toluene), certain alcohols, ketones (acetone) and some esters.

Epoxy is sometimes indicated as resistant also to stronger acids. This may be correct, but as an applied coating one must count on "holidays" in the film, thus making epoxy unsuitable for really corrosive liquids.

Page 6: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 6

Zinc silicate coatings particularly those of inorganic type, are very resistant against strong solvents and normally tolerate higher temperatures than epoxies. Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones.

Zinc silicate coatings may, under some circumstances, cause zinc pick up into the cargo. They are therefore not normally suitable for edible oils for human or animal consumption, because the contents of free fatty acids may increase during transport, and also jet fuels may suffer zinc "pick up" from the coating to an extent which is considered a contamination. Zinc silicates are not resistant against acids or alkalis. Zinc silicates are only partly resistant to chlorinated compounds. If the water content is high hydrochloric acid may develop, which will attack the coating. In a similar way hydrolysable hydrocarbons such as esters, acetates and halogenated compounds may attack the cargo. Alkaline tank cleaning agents (caustic) should never be used in zinc silicate coated tanks. Considerable damage can be done in one single cleaning operation. Zinc silicates stand well up against other cleaning agents such as "solvent cleaners" and "emulsifiers" unless they have alkaline additives.

Tank cleaning is also extremely important after discharging cargo, as tanks not properly cleaned of all cargo residue could adversely affect the purity of the next cargo loaded. Often, tankers must also comply with “last cargo” regulations to prevent any possible contamination, which can be a problem on some trades.

The boundary between a chemical tanker and a product tanker is not easily defined, beyond the definitions of tank coating and IMO grade classification. Obviously, a high specification vessel with stainless steel tanks and IMO II certification has all the interest to carry only high-requirement cargoes as it can earn much higher premiums on such employment. However, many lower-specification vessels can potentially switch at will between mainstream oil product trades such as gasoline and certain easier ‘chemical’ trades.

Page 7: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 7

Many tankers which were ordered with the clear intention of being used primarily on traditional ‘product’ trades have been built to a higher specification making them IMO III or even IMO II level. All this, together with an incomplete and not very accurate fleet data (large numbers of ‘unknown IMO’ units) can make it difficult to accurately portray the size of the chemical tanker fleet.

In general, IMO I and IMO II grade tankers are most commonly referred to as proper chemical tankers, whilst most IMO III ships are more often described as product tankers.

Given the constraints above, for the purpose of this study we have considered as chemical tankers all tanker ships with an IMO classification of I, II or III and either stainless steel tanks or either marineline, zinc, or epoxy coating.

In this study we only consider ships of between 1,000 and 30,000 dwt. We do not include larger ships also because it is particularly difficult to differentiate them from product tankers, especially when it comes to the orderbook where detailed technical specs of the vessels are often not available.

Page 8: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 8

Fleet Development (Deliveries, Demolitions & Fleet Growth)

Page 9: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 9

Over the next few slides we will illustrate the current situation of the chemical tanker fleet, in terms of number of trading units, total deadweight, the orderbook, and projected fleet growth.

According to our calculations, the IMO I, II and III chemical tanker fleet of units of 1,000-30,000 dwt amounts to about 2,675 units as August 2018, for a total of 29.5 mln dwt.

As can be seen in the pie chart on slide 10, more than half of the fleet are of ‘small’ size below 10,000 dwt. Around 40 percent of the fleet is of a size between 10,000-20,000 dwt, and only about 8 percent is above 20,000 dwt. However, units over 20,000 dwt account for approximately 18 percent of capacity in deadweight terms.

In 2017 we recorded the delivery of 18 larger, 26 medium and 39 smaller chemical carriers compared to 20, 33 and 26 the previous year. Overall deliveries slowed to 1.07 mln dwt from 1.18 mln dwt in 2016. In 2018, assuming no slippages, 1.76 mln dwt in deliveries are expected, driven by a large orderbook in the 10-19,999 dwt range where there are as many as 65 units on order for the whole year.

Annual deletions from chemical fleet dropped to 61 units in 2017, compared to 149 units in 2015 and 147 units in 2016. Demolition appears set to increase this year, with already 80 units scrapped in the first 7 months of 2018, almost all in the smaller sizes.

The sector has experienced very strong fleet growth between 2006 and 2012, then the fleet growth gradually slowed. From 2016 because of stronger delivery rates, and in 2017 because of slower demolition, the fleet growth started accelerating again and in 2018 according to the present orderbook a new peak at 4 percent is expected. Growth should then slow considerably, decreasing by 1 percent in 2020.

The current orderbook consists of approximately 170 units, or 2.3 mln dwt. This is equivalent to 6.5 percent of the trading fleet in terms of units and 7.9 percent in terms of capacity.

Page 10: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 10

Over half of the fleet is composed of smaller vessels below 10,000 dwt. 40 percent of the fleet is of a size between 10,000-20,000 dwt and only 8 percent is larger than 20,000 dwt.

20-29,999 dwt2248%

10-19,999 dwt1,06940%

1-9,999 dwt1,38252%

Total Chemical Tanker Fleet By Size Sector - by No. of Units(August 2018 ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

Page 11: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 11

20-29,999 dwt5.4718%

10-19,999 dwt16.3856%

1-9,999 dwt7.6226%

Total Chemical Tanker Fleet By Size Sector - by DWT(August 2018 ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

In total deadweight terms, the 1,000-9,999 dwt sector accounts for only 26 percent of the fleet, with medium-sized units between 10,000-19,999 dwt accounting for 56 percent of total capacity. Units over 20,000 dwt reach only 18 percent of the global capacity.

Page 12: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 12

In 2017, we recorded the delivery of 18 larger, 26 medium and 39 smaller chemical carriers, compared to 20, 33 and 26 respectively in 2016. In 2018, assuming no slippages, 138 chemical tanker are expected to be delivered.

0

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150

200

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300

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

un

its

Chemical Tanker Deliveries + Orderbook in Units - Annual(August 2018 ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

1-9,999 dwt 10-19,999 dwt 20-29,999 dwt

Page 13: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 13

In 2017, in deadweight terms, deliveries slowed to 1.07 mln dwt from 1.18 mln dwt in 2016. In 2018, we expect deliveries to reach around 1.76 mln dwt, of which over 1.0 mln dwt between 10-20,000 dwt.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

mln

DW

TChemical Tanker Deliveries + Orderbook in DWT - Annual

(August 2018 ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

1-9,999 dwt 10-19,999 dwt 20-29,999 dwt

Page 14: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 14

In 2017, 83 vessels were delivered for 1.07 mln dwt including 39 units of 1,000-9,999 dwt (0.21 mln dwt), 26 units of 10,000-19,999 dwt (0.42 mln dwt) and 18 units of 20,000-29,999 dwt (0.45 mln dwt). After the record level recorded in January 2018, in 2018 so far almost 0.9 mln dwt were delivered, 36 percent more then in the same period of 2017.

0.00

0.05

0.10

0.15

0.20

0.25

07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018

mln

DW

TChemical Tanker Newbuilding Deliveries in DWT - Monthly

(August 2018 ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

1-9,999 dwt 10-19,999 dwt 20-29,999 dwt

Page 15: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 15

2011, 2013, 2015 and 2016 were the busiest years for chemical demolition with more than 150 units removed from service each year. In 2017 only 61 units were sold for demolition: 49 smaller, 9 medium and 3 large size units.

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20

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140

160

180

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1-8)

un

its

Chemical Tanker Demolitions in Units - Annual(August 2018 ; includes vessels scrapped or removed from chemical service ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

1-9,999 dwt 10-19,999 dwt 20-29,999 dwt

Page 16: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 16

After a record 1.3 mln dwt were removed from the chemical tanker fleet in 2015, demolition activity then slowed to 1.0 mln dwt in 2016 and 0.4 mln dwt in 2017. In the first 7 months of 2018, 0.45 mln dwt were reported demolished.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1-8)

mln

DW

TChemical Tanker Demolitions in DWT - Annual

(August 2018 ; includes vessels scrapped or removed from chemical service ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

1-9,999 dwt 10-19,999 dwt 20-29,999 dwt

Page 17: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 17

In the first 7 months of 2018, 80 units were demolished for a total 177,000 dwt: 71 units in the 1-9,999 dwt size, 6 units in the 10-19,999 dwt size and 3 in the 20-29,999 dwt size. A strong increased compared with the 61 units reported removed from chemical service in 2017.

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018

mln

DW

TChemical Tanker Demolitions in DWT - Monthly

(August 2018 ; include vessels scrapped or removed from chemical service ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

1-9,999 dwt 10-19,999 dwt 20-29,999 dwt

Page 18: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 18

The largest net increase in the first 7 months of 2018 was in the 10-19,999 dwt segment which grew by 0.37 mln dwt, followed closely by 0.23 in the 20-29,999 dwt. The 1-9,999 dwt was the only one reported shrinking.

0.27

0.09 0.08

0.12

0.46

0.31

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

1-9,999 dwt 10-19,999 dwt 20-29,999 dwt

mln

DW

TChemical Tanker Deliveries and Demolitions in Jan-Jul 2018

(demo include vessels scrapped or removed from chemical service ; only IMO I, II and III units ; 1,000-30,000 dwt)

Demolitions Deliveries

Page 19: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 19

Our growth forecast in number of units for 2018-2020 is based on the current orderbook and assumes demolition activity continues at the same rate as in recent years.

+3% +2%

-2%

+0%

-2%

+1% +3% +4% +1%

-1%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f)

mln

DW

TProjected 1,000-29,999 Chemical Tanker Fleet Growth

(August 2018 ; only IMO I, II and III units ; in mln dwt)

All Chemical Tanker (1,000 - 30,000 dwt) Fleet Size (in mln DWT) Y-o-Y Growth

Page 20: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 20

Our growth forecast in number of units for 2018-2020 is based on the current orderbook and assumes demolition activity continues at the same rate as in recent years.

+4%

-1% -0% -1% -1%

+11%+8%

+5% +4% +2%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f)

mln

DW

TProjected 20,000-29,999 dwt Chemical Tanker Fleet Growth

(August 2018 ; only IMO I, II and III units ; in mln dwt)

20,000-29,999 dwt Chemical Fleet Size (in mln DWT) Y-o-Y Growth

Page 21: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 21

Our growth forecast in number of units for 2018-2020 is based on the current orderbook and assumes demolition activity continues at the same rate as in recent years.

+4%+3%

-1%

+0%

-1%

+1% +2%+5%

+1%

-1%

0.0

3.0

6.0

9.0

12.0

15.0

18.0

2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f)

mln

DW

TProjected 10,000-19,999 dwt Chemical Tanker Fleet Growth

(August 2018 ; only IMO I, II and III units ; in mln dwt)

10,000-19,999 dwt Chemical Fleet Size (in mln DWT) Y-o-Y Growth

Page 22: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 22

Our growth forecast in number of units for 2018-2020 is based on the current orderbook and assumes demolition activity continues at the same rate as in recent years.

-1%

+2%

-6%

+2%

-7% -7%-0% -1% -4%

-7%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f)

mln

DW

TProjected 1,000-9,999 dwt Chemical Tanker Fleet Growth

(August 2018 ; only IMO I, II and III units ; in mln dwt)

1,000-9,999 dwt Chemical Fleet Size (in mln DWT) Y-o-Y Growth

Page 23: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 23

Shipbuilding Trends (Newbuilding Orders & Major Builders)

Page 24: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 24

In 2017, 93 chemical carriers were ordered: 43 smaller, 45 medium and 7 larger units for a total 1.1 mln dwt, a 16 percent increase compared to 2016. In the first 7 months of 2018, only 19 units amounting to 259,000 dwt were ordered, 59 percent less in terms of deadweight terms compared with the same period of 2017.

0.00

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0.20

0.25

0.30

07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018

mln

DW

TChemical Tanker Newbuilding Orders in DWT - Monthly

(August 2018 ; only IMO I, II and III units ; 1,000-30,000 dwt)

1-9,999 dwt 10,000-19,999 20,000-29,000 dwt

Page 25: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 25

The construction of large chemical tankers of over 20,000 dwt has become increasingly common over the last decade, but the core of the fleet still remains in small units below 10,000 dwt.

0

5,000

10,000

15,000

20,000

25,000

30,000

1983 1988 1993 1998 2003 2008 2013 2018

dw

t

Year of delivery

Chemical Tanker Vessel Size Distribution(only IMO I, II and III units, 1,000 - 30,000 dwt, delivered in each year)

Page 26: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 26

In the current orderbook there is a focus on small units of between 5-8,000 dwt, medium units between 12-13,000 dwt and units around 20-25,000 dwt.

0

5,000

10,000

15,000

20,000

25,000

30,000

08-2018 02-2019 08-2019 02-2020 08-2020 02-2021 08-2021

dw

t

Year of delivery

Chemical Tanker Orderbook Size Distribution(only IMO I, II and III units, 1,000 - 30,000 dwt, due in each month)

Page 27: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 27

Over the last 20 years Japanese shipyards have maintained a steady share of chemical tanker newbuildings, whilst Chinese shipyards have increased their share.

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320

19

86

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16

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20

un

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Chemical Tanker Age Profile By Country of Build(August 2018 ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

Japan Korea China Turkey Europe Others

Page 28: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 28

One third of the fleet are Japanese-built vessels. Chinese shipyards have built almost a quarter of the global chemical fleet. South Korea and Turkey realized a further 15 percent each.

Japan33%

Korea15%

China24%

Turkey15%

Europe10%

Others3%

Trading Chemical Tanker Fleet by Country of Build(only IMO I, II and III units ; 1,000 - 30,000 dwt ; as % of fleet in units)

Page 29: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 29

Over half of the orderbook is now on order at Chinese yards that rapidly grew in this sector. Almost one third of the orderbook is expected to be built in Japan. South Korea and Turkey account for a further 8 percent and 5 percent respectively.

Japan30%

Korea8%

China52%

Turkey5%

Europe2%

Others3%

Chemical Tanker Orderbook by Country of Build(only IMO I, II and III units ; 1,000 - 30,000 dwt ; as % of fleet in units)

Page 30: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 30

Shipbuilding over the last decade has been dominated by Japanese yards such as Fukuoka, Shin Kurushima and Usuki and S. Korean yards such as Hyundai and 21st Century.

Fukuoka5%

ShinKurushima

4%Hyundai

4%Usuki3%

Asakawa3%

Kitanihon3%

Yangzhou2%

21st.Century

2%

Higaki2% Shitanoe

2%

Other70%

Trading Chemical Tanker Fleet by Shipyard(only IMO I, II and III units ; 1,000 - 30,000 dwt ; as % of fleet in units)

Page 31: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 31

The growing presence of Chinese yards in the orderbook pie chart is evident with 3 yards in the top 10 accounting for over a quarter of the global chemical tanker orderbook.

AVICDingheng

14%

Kitanihon9%Ningbo Xinle

9%

Usuki7%

Fukuoka6%

ShinKurushima

6%

Asakawa5%

Dae Sun4%

Zhejiang4%

Samjin4%

Other32%

Chemical Tanker Orderbook by by Shipyard(only IMO I, II and III units ; 1,000 - 30,000 dwt ; as % of fleet in units)

Page 32: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 32

The number of stainless steel chemical tankers being built has remained relatively steady over the last two decades, whilst the number of marineline and epoxy-coated units increased sharply from 2005.

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19

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88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

un

its

Chemical Tanker Age Profile By Tank Coating(trading+orderbook only ; only IMO I, II and III units ; 1,000 - 30,000 dwt)

Stainless Steel Marineline Interline Zinc Epoxy

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Aug 2018 – Chemical Tanker Outlook 33

The stainless steel fleet and epoxy fleet now account for around 40 percent each of the 1,000-30,000 dwt chemical tanker fleet, with marineline units now accounting for 16 percent.

Stainless Steel40%

Marineline16%

Interline1%

Zinc3%

Epoxy40%

Trading Chemical Tanker Fleet by Tank Coating(only IMO I, II and III units ; 1,000 - 30,000 dwt ; as % of fleet in units)

Page 34: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 34

The orderbook for stainless steel vessels accounts for around 50 percent of the 1,000-30,000 dwt chemical tanker orderbook, with epoxy units now accounting for 39 percent and marineline reaching 6 percent.

Stainless Steel50%

Marineline6%

Interline3%

Zinc2%

Epoxy39%

Chemical Tanker Orderbook by Tank Coating(only IMO I, II and III units ; 1,000 - 30,000 dwt ; as % of fleet in units)

Page 35: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 35

Detailed Age Profiles (For Individual Sectors)

Page 36: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 36

0

50

100

150

200

250

300

350

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

un

its

Chemical Tanker (1,000-29,999 dwt) Age Profile (in units)

Scrapped or Removed from Chemical Service Trading Orderbook(updated in August 2018)

Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs

No of units 16 73 223 340 884 804 335

% of fleet 1% 3% 8% 13% 33% 30% 13%

Page 37: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 37

0

3

6

9

12

15

18

21

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

un

its

Chemical Tanker (20,000-29,999 dwt) Age Profile (in units)

Scrapped or Removed from Chemical Service Trading Orderbook(updated in August 2018)

Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs

No of units 0 2 0 41 65 57 59

% of fleet 0% 1% 0% 18% 29% 25% 26%

Page 38: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 38

0

20

40

60

80

100

120

140

160

180

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

un

its

Chemical Tanker (10,000-19,999 dwt) Age Profile (in units)

Scrapped or Removed from Chemical Service Trading Orderbook(updated in August 2018)

Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs

No of units 0 9 75 110 409 340 126

% of fleet 0% 1% 7% 10% 38% 32% 12%

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Aug 2018 – Chemical Tanker Outlook 39

0

20

40

60

80

100

120

140

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

un

its

Chemical Tanker (1,000-9,999 dwt) Age Profile (in units)

Scrapped or Removed from Chemical Service Trading Orderbook(updated in August 2018)

Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs

No of units 16 62 148 189 410 407 150

% of fleet 1% 4% 11% 14% 30% 29% 11%

Page 40: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 40

The Demand Side (Chemical & Veg Oils Trades)

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Aug 2018 – Chemical Tanker Outlook 41

Cargoes carried on chemical tankers are usually divided into three main categories: organic chemicals, inorganic chemicals and vegetable oils/animal fats. Seaborne trade in chemicals, both organic and inorganic, excluding vegetable oils, have grown steadily over the past decade. It is estimated that the seaborne chemical trade remained virtually unchanged in 2017 at 131.5 million tonnes, but could grow again in 2018 to 134.8 million tonnes.

Seaborne trade in vegetable oils has grown faster, approximately 22 percent over the past five years, to reach an estimated 91.0 million tonnes in 2017 and is estimated at 93.1 million tonnes in 2018.

Organic chemicals are derived from hydrocarbon sources such as oil and natural gas. They are primarily used as feedstock for production of other chemicals or for products such as plastics, fibres, rubber and pesticides.

The main seaborne traded organic chemicals include methanol, MTBE, styrene, xylene, benzene and toluene. Together they represent almost 50 percent of the seaborne traded chemicals and have grown steadily over the last twenty years.

China is now the largest consumer of organic chemicals, although with China’s drive towards self-sufficiency, 2018 could be remembered as the year when trades routes started to shift from “To China” into “From China”. With new plants entering into service, imports started to slow at the end of 2017, with toluene and MTBE leading the shift. On 13 February 2018, China imposed antidumping duties of between 5 and 10.7 percent on styrene monomer from S. Korea, U.S. and Taiwan. Moreover, China imposed more antidumping duties on Hydriodic Acid originating in the US and Japan, on Ethanolamines from the U.S., Saudi Arabia, Malaysia and Thailand, on Toluidine from the E.U. and on Styrene Monomer Originating in S Korea, Taiwan and the U.S., mainly due to the escalating trade tensions with the U.S. On 4 April, China raised the antidumping duties for butyl glycol and butyl di-glycol originating from the U.S. and the E.U. The paraxylene market is expected to be oversupplied as China reduces its dependence on imports, while emerging new supplies from India and Middle

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Aug 2018 – Chemical Tanker Outlook 42

East are starting to compete with traditional exporters in S. Korea and Japan. The new plants are expected to reduce aromatics imports on one side, but are also expected to boost benzene imports which could rise up to 18 percent in 2018 to 3 mln mt according to Platts.

Ethylene and propylene will be supported by a heavy turnaround schedule in Asia Pacific, as more steam crackers will undergo maintenance in 2H 2018, compared with 1H 2018. Around 765,250 mt of ethylene production is estimated to be disrupted in 2H 2018, due to the steam cracker turnaround season, compared with 709,950 mt in 1H 2018. In Southeast Asia, an estimated 311,000 mt of ethylene production will be lost in 2H 2018, as opposed to none in 1H 2018, as no steam cracker was shut for maintenance. An increase in China’s acrylonitrile production capacity will add to incremental demand for propylene.

Environmental concerns may also drive India’s ethylene demand, as PVC producers are likely to gear towards ethylene-based production as most calcium carbide furnaces are deemed to be not environmentally friendly.

Seaborne trade of methanol has increased significantly in recent years and is expected to continue to do so, with global demand forecast to more than double over the next decade. Trade has been driven by increasing demand from China, whose imports account for 10 percent of methanol consumption in the country. Methanol imports to China have increased over ten fold over the past decade, estimated to have reached 8.1 mln tonnes in 2017. However, China has become less dependent on imported methanol after building up domestic production capacity, a trend which is expected to continue into 2018 when, during the first 6 months, imports reached 3.9 mln tonnes. Despite this, Chinese imports are still expected to reach 20 mln tonnes within the next decade.

India is also a growing source of methanol demand. Methanol imports to India have more than doubled over the past 10 years reaching around 1.7 mln tonnes in 2017 and showing over 0.9 mln tonnes imported in the first 6 months of 2018. Methanol is exported primarily from the Middle East; however exports are also sourced

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Aug 2018 – Chemical Tanker Outlook 43

from SE Asia, New Zealand and the Caribbean.

The U.S. are also expected to become a significant exporter of methanol. A surge in new U.S. methanol production capacity is expected over the next few years, driven by available shale-derived feedstock. New production capacity is likely to drive long-haul shipments from the U.S. to the Asian market. Around 24 mln tonnes per year of methanol production capacity is expected to be added in the U.S. over the next 5 years but last commercial tensions with China risks to impact on exports from the U.S.

For years, the US depended largely on imports from tiny Trinidad and Tobago for its methanol supply, until producers began restarting mothballed plants in 2011-2012. A few years later US methanol capacity was just short of 2.5 mln

tonnes per year in early 2015, while U.S. capacity reached 7.5 mln tonnes per year in the second quarter of 2018 with the start up of a 1.75 mln tonnes per year methanol plant in Beaumont, Texas. U.S. exports of methanol reached 1.51 mln tonnes in 2017, after surpassing the 1.0 mln tonnes mark in 2016. Commercial tensions will be an important factor determining U.S. methanol exports in the future, because most of the demand growth is coming from China and Iran. Uncertainty in Venezuela’s market could also support U.S. exports.

Inorganic chemicals comprise mostly of acids, such as sulphuric acid, phosphoric acid and nitric acid, as well as caustic soda. Acids are mostly utilized in the production of phosphate fertilizers, whilst caustic soda is primarily used in the aluminium industry. Inorganic chemicals represent about 30 million tonnes per year, and volumes have increased only moderately over the last few decades losing grounds in 2017. China is the biggest producer and consumer of major inorganics, and major trades include inter-Asia as well as North America to Latin America.

Vegetable oils represent about 41 percent of total chemical seaborne trade, about 91 million tonnes in 2017, and are one of the fastest growing typologies of ‘chemical’ cargo. Malaysia and Indonesia are the largest exporters of vegetable oils in particular to Asia and Europe.

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Aug 2018 – Chemical Tanker Outlook 44

+3% +5% +2% +2% +4% +3% +3% +2% +3% +2%

0.0

50.0

100.0

150.0

200.0

250.0

2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f)

mill

ion

to

nn

es

World Chemical & Veg Oil Trade - Annual(source: MSI, Drewry + estimates; in million tonnes)

Total Chemical + Veg Oil Trade Volumes Y-o-Y Growth

Seaborne trade in chemicals has grown by an average of about 2 percent per year over the past five years. Trade in vegetable oils has grown by an average of almost 5 percent per year over the same period.

mln

to

nn

es

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Aug 2018 – Chemical Tanker Outlook 45

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(1-6)

mill

ion

to

nn

es

China & India Methanol Imports - Annual(source: Comtrade ; in million tonnes)

India China

After jumping significantly in 2009, methanol imports to China have remained relatively stable since 2014 and started to increase in 2015. In 2017 methanol imports to China slowed down to 8.1 mln tonnes and in the first 6 months of 2018 reached 3.9 mln tonnes. Methanol imports to India have more almost doubled over the past ten years.

mln

to

nn

es

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Aug 2018 – Chemical Tanker Outlook 46

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2018 2019 2020 2021 2022

mill

ion

to

nn

es

U.S. Methanol Capacity & Planned Additions - Annual(source:MSI, Navig8 ; in million tonnes)

Construction/Engineering Planned Feasibility Suspended/Delayed

A surge in new U.S. methanol production capacity is expected over the next few years, driven by readily available shale-derived feedstock.

mln

to

nn

es

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Aug 2018 – Chemical Tanker Outlook 47

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2012 2013 2014 2015 2016 2017 2018 (1-6)

mill

ion

to

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es

U.S. Methanol Exports - Annual(source: comtrade ; in million tonnes)

The increase recorded in U.S. methanol production capacity is reflected in a strong growth of exports, mainly driven by available shale-derived feedstock. In 2016, U.S. methanol exports reached 0.97 mln tonnes, up 170% year-on-year and exports in 2017 closed just over 1.5 mln tonnes. In the first 6 months of 2018 exports reached 0.8 mln tonnes.

mln

to

nn

es

Page 48: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 48

+2% +6% +2% +6% +5% +3% +7% +2% +3% +2%

0.0

20.0

40.0

60.0

80.0

100.0

2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f)

mill

ion

to

nn

es

World Vegetable Oil Trade - Annual(source: MSI ; in million tonnes)

Vegetable Oil Trade Volumes Y-o-Y Growth

Vegetable oil trade grew steadily to reach an estimated 91.0 million tonnes in 2017 and is estimated at 93.1 million tonnes in 2018.

mln

to

nn

es

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Aug 2018 – Chemical Tanker Outlook 49

Charter and S&P Markets (Rates, Newbuilding & Secondhand Prices)

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Aug 2018 – Chemical Tanker Outlook 50

4,000

6,000

8,000

10,000

12,000

14,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

usd

/day

Stainless Steel Chemical Tanker 1-Year Timecharter Rates (basis modern 6k and 12k dwt IMO II , estimated annual averages, in usd/day)

6,000 dwt St.St. 12,000 dwt St.St.

One-year timecharter rates for stainless steel vessels have been on a positive trend since 2009; however in 2017 the average 1-yr TC rate for medium sizes dropped almost 20 percent. In the first 7 months of 2018, instead, a slight increase of 2.0 percent was recorded, while smaller sizes showed a moderate declines.

(1-7)

USD

/day

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Aug 2018 – Chemical Tanker Outlook 51

4.0

8.0

12.0

16.0

20.0

24.0

28.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

usd

mill

ion

Chemical Tanker 5-Year Old Secondhand Prices(basis modern 6k and 12k dwt IMO II units, estimated annual averages, in usd mln)

6,000 dwt St.St. 6,000 dwt Epoxy 12,000 dwt St.St. 12,000 dwt Epoxy

After the fall that followed the financial crisis, secondhand values remained fairly stable, with smaller sizes growing more strongly after 2016 and ST/ST 12,000 dwt units showing a more constant increase since 2015.

(1-7)

USD

mill

ion

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Aug 2018 – Chemical Tanker Outlook 52

10.0

15.0

20.0

25.0

30.0

35.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

usd

mill

ion

Chemical Tanker Newbuilding Prices(basis modern 6k and 12k dwt IMO II units, estimated annual averages, in usd mln)

6,000 dwt St.St. 6,000 dwt Epoxy 12,000 dwt St.St. 12,000 dwt Epoxy

Newbuilding prices remain at their lowest in 15 years in most of the segments, but stainless steel vessels were starting to show some signs of recovery.

(1-7)

USD

mill

ion

Page 53: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 53

Final Words (Summary & Conclusions)

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Aug 2018 – Chemical Tanker Outlook 54

The current fleet of chemical tankers between 1,000-30,000 dwt, amounts to about 2,675 units as of August 2018, for a total of 29.5 mln dwt. 40 percent of the fleet is stainless steel, another 40 percent is Epoxy coated. The average age of the chemical fleet is just 11.3 years of age.

The sector has experienced very strong fleet growth between 2006 and 2012. The peak of deliveries was in 2008, with over 300 units delivered. Annual deliveries have been steadily declining since. In 2017, 83 units were delivered, for a total of 1.1 mln dwt. In 2018, a total of 138 units are scheduled to de delivered, totalling 1.8 mln dwt.

Having grown an average 3.3 percent in dwt capacity over the last 5 years, the chemical tanker fleet could grow an additional 4.0 percent in 2018 if the orderbook is delivered in full with no slippage, although a pick up in demolition activity could slow fleet growth. The fastest growth is expected in the larger segments, whilst the 1,000-9,999 dwt size could shrink slightly.

The current orderbook amounts to about 170 units, totalling 2.3 mln dwt. This is equivalent to 7.9 percent of the current trading fleet in terms of total dwt. Almost half of the current orderbook is now on order at Chinese shipyards, whose share has been strongly growing over the last 15 years.

Seaborne trade in chemical cargoes – organic chemicals, inorganic chemicals, and vegetable oils/animal fats – has grown steadily over the past decade. It is estimated that the chemical trade grew 2.9 percent in 2017 to 222.5 mln tonnes, and is expected to reach 227.9 mln tonnes in 2018.

Rates are at historical lows while prices started to show some signs of recovery. Deliveries are expected to be relatively strong in 2018, especially for bigger units; however demand could pick up especially on longer routes. A mixed picture emerges for the chemical sector as the situation is further complicated by the current trade war between the U.S. and China, which has the potential to strongly impact the market.

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Aug 2018 – Chemical Tanker Outlook 55

banchero costa & c. s.p.a. banchero costa research

In addition to regular market reports, banchero costa research recognize the need for bespoke reports & analysis, tailored to specific client needs.

Reports can be produced on a wide range of shipping markets including dry bulk, tankers, gas & containers. In addition in-depth reports can be produced on specific commodity markets.

To discuss individual requirements please contact:

Phone: +65 6327 6863

Email: [email protected]

Page 56: Chemical Tanker Outlook...Typical products are: aromatic hydrocarbons (benzene, xylene etc), alcohols, ketones. Zinc silicate coatings may, under some circumstances, cause zinc pick

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Aug 2018 – Chemical Tanker Outlook 56

head office: via pammatone, 2 16121 genoa (italy)

phone: + 39-010-[5631-1]

dry - capesize 5631-200 [email protected] research 5631-535 [email protected]

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phone: +44-207-398-1870 phone: +377-97-707-497 phone: +41-22-737-2626 phone: +971-4-360-5598

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phone: +65-6327-6862 phone: +852-2865-1535 phone: +86-10-8453-4993 phone: +81-362-688-958

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web site: www.bancosta.com

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Legal notice: The information and data contained in this presentation is derived from a variety of sources, own and third party’s, public and private, and is provided for information purposes only.

Whilst banchero costa has used reasonable efforts to include accurate and up-to-date information in this presentation, banchero costa makes no warranties or representations as to the accuracy

of any information contained herein or accuracy or reasonableness of conclusions drawn there from.

Although some forward-looking statements are made in the report, banchero costa cannot in any way guarantee their accuracy or reasonableness.

banchero costa assumes no liabilities or responsibility for any errors or omissions in the content of this report.

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