Overtonnaging in the chemical tanker sector will make it a challenging environment for at least the next two years, according to a new report from UK consultants Drewry.
“The fleet will continue to expand because of the large number of orders placed in previous years, but growth will be subdued compared to 2015-16. While deliveries and ordering have reduced in 2016, there are still many ships scheduled to be delivered in the next five years because of heavy ordering during 2014 and 2015,” Drewry noted.
More demolitions are expected because of new regulations that will come into force in 2017.
However, this is likely to have little impact on fleet supply, as most of the older ships are of less than 10,000 dwt, and thus, the capacity that can be scrapped will be a small percentage of the total fleet.
“We expect fleet oversupply to persist in 2017 and time charter rates for larger ships, especially MRs, to decline because of stiff competition. However, rates for vessels in the smaller categories are likely to remain stable in 2017,” commented Hu Qing, Drewry’s lead analyst for chemical shipping.
“The chemical fleet grew by 5.2% in 2016 and is expected to expand by 3.3% to the end of 2017, which will continue squeezing rates on major routes over the next two years. New orders and deliveries are also expected to decline further because of the depressed market and financial woes of shipyards,” added Qing.