The chemical tanker market, once a niche sector, has matured into a mainstream industry, marked by increasing commoditisation, larger parcel sizes, and greater trader activity. This transformation has led to a growing demand for benchmarking tools, culminating in the launch of new chemical and vegetable oil indexes by the Baltic Exchange.Mark Roberts, group COO at SPI Marine, founder and chair at Delphi Vision, and CEO at CKB Fleet, highlighted the interplay of factors shaping the chemical tanker market at a Baltic Exchange Tanker Forum in November. On the demand side, the industry is intrinsically linked to end-user consumer demand, driven by mega-trends like population growth and urbanisation.

The rise of the Middle East as a petrochemical hub and the US shale gas boom have further fuelled demand, leading to significant growth in average ton-miles.

However, recent economic headwinds, including higher interest rates and slowing global growth, have tempered demand somewhat. “It’s a fascinating market,” said Roberts, “There have been a lot of changes in the time I’ve been in industry in the last 15 years.”

On the supply side, the fleet has more than doubled in the past 15 years, but supply growth has slowed in recent years. The order book, however, is now on the rise. The market’s maturation has led to increased commoditisation and larger parcel sizes. “All of these characteristics are characteristics that we see in other petroleum products markets, which are now flowing through to this segment as it becomes more and more mainstream – all the more reason for indexing,” said Roberts.

Future forecast

Looking ahead, he outlined several key trends that will shape the future of the chemical tanker market. Firstly, the Middle East is poised to become the epicentre of chemical tanker trade, driven by significant capacity additions in the region.

Secondly, the market is characterised by relatively stable vessel speeds: “A lot of the way they trade is pretty advanced in terms of triangulation, multiple loads, multiple discharge ports, so you get less variability,” Robert said.

However, environmental regulations will likely lead to further slowdowns. This will require more tonnage to transport the same volume of cargo. “For example, if the fleet on average was trading at, say, 11 knots, and then the next year it was trading at 10 knots, that takes out around 10% of capacity from the market.

Any changes in the speed of the fleet have a massive impact on the real deadweight demand for tonnage in this sector.”

Thirdly, the order book is growing, meanwhile, indicating significant fleet growth in the coming years. “We’re expecting 2.7% growth in the fleet full year this year, 3.3% in 2025 and 4.6% in 2026,” Robert said. However, the aging fleet will also see increased removals, particularly if market conditions soften.

While demand growth is expected to remain broadly in line with global GDP growth, which is projected at between 3% and 4%, the supply side remains a key uncertainty, with the potential for significant fluctuations in the order book. This could have a pointed impact on the market’s balance. In effect, this market could be influenced by the people controlling the supply side, because of the amount of the ships ready to be scrapped if the market softens, or if regulation dictates. “When they’re scrapped is dependent on market conditions. If the market starts softening you could see a lot more vessels heading to the yards, which takes out tonnage, which maintains market levels.”

Need for index

Overall, current fundamentals point to a consistent, “fairly firm” market in terms of utilisation and rates for the medium term, according to SPI. However, further out in the forecast the degree of confidence in that outlook “falls away pretty significantly”. All in all, it’s a good time to be launching an index for the Baltic Exchange, Roberts said.

He emphasised the importance of indexing in driving efficiency and transparency in the chemical tanker market.

The new indexes launched by the Baltic Exchange will provide a valuable benchmark for market participants, enabling them to make more informed decisions.

“When I started in this industry 15 years ago, it was often referred to as the sort of murky world of chemical tankers. No one really knew very much about it,” he said. “Indexing plays a key role in efficiency in any market. We’ve had a number of clients supporting the initiative for benchmarking and actively approaching us in recent years for that drive,” he said.

Source: Baltic Exchange