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BIGGER AND BETTER MARKET • CHEMICAL TANKERS DID PRETTY WELL LAST YEAR BUT HOW WILL THE SECTOR RECOVER FROM COVID-19, IMO 2020 AND OTHER CHALLENGES? BRS HAS SOME POINTERS THE COVID-19 PANDEMIC “smashed” the global economy in the first half of 2020 and it will be a long time before it gets back to pre-pandemic levels, especially in the western hemisphere. China is likely to be the only major economy to get back to ‘normal’ this year, with the Atlantic basin probably waiting until the second half of 2022. These predictions, which underpin any analysis of global chemical trade and the resulting demand for chemical tanker capacity, were made by Andrew Wilson, head of energy and tanker research at BRS Brokers, during the IV Med Hub Day, organised
by Port Tarragona and ChemMed and held virtually this past 19 and 20 November. Wilson had been invited to give his views on the impact of Covid-19 and other disruptions during 2020 on the Mediterranean tanker market, which he felt will be “difficult” over the next year or two. One important result of the Covid-19 pandemic has been a sharp decline in demand for road fuels; this followed immediately after refiners had been taking advantage of low oil prices to run their assets fast early in 2020, which has left them with high stocks. “A lot of plants are now under
threat,” Wilson said: some that have been shuttered may never re-open, he predicted. SHIFTING SUPPLIES Ageing refineries in the mature markets in Europe and North America will in any case struggle to compete with new, more efficient plants now opening up – and these are overwhelmingly in Asia. Wilson said that 91 per cent of new capacity due to open in 2021 is located east of Suez. That will follow on from two new 400,000 bpd refineries opening in December 2020, one in Saudi Arabia and one in China, both of which are highly integrated with downstream petrochemical facilities. In order to balance the market, Europe needs to lose 2m bpd of refinery capacity and older, smaller and less efficient plants will have to go, Wilson said. Those with integrated petrochemical production will remain and others located in strategic hubs will have an advantage. Significantly for the product and chemical tanker markets, this move towards integrated ‘mega-plants’, especially in the Middle East and China, will mean a move towards larger parcel sizes, a trend that Wilson said will continue over the coming decade. And significantly for the Mediterranean market, China’s Belt & Road initiative involves a maritime route that ends in the region. Hub ports in the Mediterranean will therefore look very attractive for both Chinese and US petrochemical producers looking for a location in Europe where they can break bulk from larger tankers for regional distribution in smaller parcels. This points to a need for more storage capacity in the Mediterranean, although it leaves the question as to whether these larger tankers will be able to find backhaul cargoes. FUELLING THE FLEET The ‘IMO 2020’ rule, mandating a significant reduction in sulphur oxide emissions from ships as from the start of 2020, was “totally
HCB MONTHLY | JANUARY 2021
