Rising demand to aid China’s chemical tanker rates

Mar 15 2019


China’s increasing domestic demand for chemical cargoes is forecast to strengthen coastal freight rates.

According to a report by Drewry Shipping Consultants, demand has been boosted by the rapid expansion in Chinese-based chemical production capacity. Some 55% of the new production capacity is located in Eastern China, 23% in Northern China and 22% in Southern China.

Given that domestic supply of major chemical products is increasing, demand for vessels is set to rise. Chinese coastal chemical trade increased by 7% in 2018 year-on- year, up from a 3% increase recorded in 2017.

Meanwhile, due to the Chinese government controlling the domestic chemical fleet’s development, shipowners have to apply for licenses to operate within the country.

In 2018, the government approved additional licenses for the domestic fleet, due to the surge in domestic demand. Nineteen new Chinese-flagged chemical tankers were delivered in 2018, while three vessels were withdrawn from the chemical shipping market.

Despite an increase in vessel supply, freight rates on China’s coastal routes will strengthen in 2019 and 2020 on the back of a stronger domestic demand and higher bunker costs, Drewry said.

China’s move to extend its 0.5% bunker fuel sulfur limit from the initially designated Emission Control Areas (ECAs) to the entire Chinese coastline would also underpin the continued rise in domestic chemical tanker freight rates.

 



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