Charting the Course: Positive Growth and Dynamic Time Charter Market

As we approach the end of Q1 2024, stakeholders in the Chemical Tanker market, including owners, investors, brokers, and other interested parties, are gearing up to report on the projected outlook for the remainder of the year. This period marks when the industry typically feels more confident in making these projections.

The outlook for the Chemical Tanker market in 2024 remains highly positive, building on a solid performance in 2023. Last year, global seaborne chemical trade reached 372.5 million tons, reflecting a 1% increase over 2022 and an impressive 8.8% improvement over the 10-year average. This growth is primarily attributed to the rapid expansion in the Asia-Pacific region, particularly in countries like China, Malaysia, and Vietnam. These nations are experiencing increased demand for chemicals to support infrastructure projects and automobile production. For instance, the Philippines is witnessing a surge in construction activities, including developing new airports, highways, bridges, and residential and commercial properties. This boom in construction is further driving the demand for chemicals as investors seek safe haven countries for real estate investments.

The Time Charter market for Chemical Tankers has been dynamic, with significant fluctuations leading up to a peak in 2022. This peak was influenced by global market conditions, including shifting consumer preferences, geopolitical tensions, and environmental concerns. Despite these fluctuations, the market has been described as "robust" through 2024. This strength can be attributed to the performance of versatile vessels known as "Swing Tonnage." These vessels allow chemical tanker owners to load Clean Petroleum Products (CPP) cargoes, providing attractive economics and flexibility for trading. The current low order book for CPP and Chemical Tankers suggests that freight returns will likely increase in the near future as demand continues to outpace supply.

Recent statements by U.S. diplomats have raised concerns about China's economic stability, citing issues such as a slowing economy, high debt levels, escalating youth unemployment, and capital outflows. Additionally, there are concerns about the business environment, as Chinese business interests may conflict with national security interests. Over the past decade, U.S. companies have faced challenges in China, including intellectual property theft and espionage charges against employees. Despite these challenges, many U.S. companies, including Walmart, Starbucks, Chevron, Tesla, and others, maintain significant investments in China. These companies will likely continue to hold their positions in China, albeit with reduced investments, until the situation stabilizes. Over the past decade, China's remarkable economic growth has lifted millions out of poverty. While it may continue at a different pace, the country is expected to remain an industrial powerhouse and a key competitor and trading partner for the U.S.

Looking ahead, the growth outlook for Chemical Tankers in 2024 is estimated at 1%. As of January, no scrapping of chemical tankers has been reported in 2024. It is projected that 157 ships classified as Chemical Tankers will be delivered by the end of 2024, with a total capacity of 3.4 million DWT. However, it is important to note that only some of these ships may trade in chemicals, which could impact the market dynamics.