According to Drewry, China’s developing increasing demand for chemical shipping is due to strengthen coastal freight rates. The demand is being boosted by the fast growth of the Chinese base chemical production capacity.
Mainly, about 55% of the new production capacity is placed in East China, 23% in North China, whereas another 22% in South China.
Drewry supports that China’s demand for vessels for domestic chemical trade is expected to increase, because domestic supply of major chemical products is on the rise.
Specifically, Chinese coastal chemical trade rose by 7% in 2018 year-on-year, experiencing an increase of 3% in comparison to 2017.
In the meantime, although the Chinese government controls the growth of the domestic chemical fleet, the shipowners themselves have to apply for licenses in order to operate within the country.
In 2018, the government proceeded with the approval of extra licenses for the domestic fleet, because of the increasing domestic demand.
Therefore, nineteen new China-flagged chemical tankers were delivered in 2018, whereas three vessels were withdrawn from the chemical shipping market.
Yet, freight rates in China’s coastal routes are expected to strengthen in 2019 to 2020 on the back of a stronger domestic demand and higher bunker cost.
Concluding, China’s decision to expanding its 0.5% bunker fuel sulphur limit from the initially designated Emission Control Areas (ECAs) to the entire Chinese coastline from January 1, 2019 would also underpin the continued rise in domestic chemical tanker freight rates.
