Chemical fleet slated to grow 2% in 2020
Drop in fuel costs supports margins of older tonnage
Eastport Research and Strategy has revised upwards its chemical and chemical/product tanker fleet growth projections from a 1% drop in 2020 to a 2% increase. Previously we expected accelerated scrapping of older vessels due to the switch to more expensive very low sulphur fuel oil (VLSFO) this year and a decline in the profitability of older tankers. But contrary to consensus expectations, VLSFO prices are actually lower this year than high sulphur fuel oil (HSFO) prices were in 2019, due to the collapse in crude prices following the Saudi Arabia-Russia price war and the outbreak of the COVID-19 pandemic. In the wake of this, margins have been supported and only 10 chemical and chemical/product tankers under 56k DWT had been scrapped as of June. As a result, Eastport Research and Strategy has boosted the expected age for scrapping from 26 to 31 years for vessels under 19k DWT, and from 21 to 25 years for bigger ships. The global fleet is now expected to grow 2% in 2020 and 3% in 2021.