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These products are highly sensitive to demand at the consumer level and respond less to price-driven effects on the market. Tank container operators need to keep an eye on changes to trade flows if they are to be best placed to capture the available demand for tanks. The global methylene diisocyanate (MDI)
“very competitive” feedstocks, which is attracting investment in ethylene capacity and downstream production. The “emergent” Middle East is pursuing its policy of integrating downstream to capture added value, although the current low oil price is slowing the process. And a “divergent” China is engaged in a “frantic” period of building integrated value chains and capacity, moving towards increasing self-sufficiency in petrochemicals. This will lead to growing exports of intermediates, Ewe said. Ewe also reassured the audience that the
current slowdown in Chinese economic growth is a natural part of the country’s development and will likely make China stronger in the long term. Elsewhere in Asia, India is among the
fastest growing petrochemical markets. It has plenty of naphtha available but remains dependent on imports for olefin feedstocks. South-east Asia is not growing as fast and, as most countries are comparatively small, projects require some exports to optimise production costs. Japan and South Korea are both mature markets with producers looking overseas for growth.
EMPLOYMENT EXCHANGE Ewe looked more closely at some of the petrochemical products that generate demand for tank containers, in particular isocyanates and methyl methacrylate (MMA).
market is slightly over-supplied, demand expected to grow at 4.1 per cent over the next five years. The opening of the massive Sadara plant in Saudi Arabia will have a major impact on overall capacity and on international trade flows, with the Middle East expected to become a key exporter to Africa, south Asia and south-east Asia. The global toluene diisocyanate market is also oversupplied, with average utilisation running below 70 per cent. Recent capacity additions in China are leading to lower operating rates around the world. Again, trade flows over the coming five years are expected to change considerably, with new exports from the Middle East replacing European production in Asian markets. In Asia, exports from Japan and South Korea will continue but China is heading for self-sufficiency. The global MMA market is more well
balanced, although additions to capacity threaten lower utilisation rates. Over the next five years, Ewe predicted, the Middle East may emerge as a key exporter to Europe and India, with exports from Singapore likely to be confined largely to China. Again, growing domestic production will reduce China’s import requirements. Graham Wood, @tco’s technical director,
explained to the audience the reason behind the International Maritime Organisation’s (IMO) new VGM rules, while Sandro Chu, senior claims executive from the TT Club’s Hong Kong office, looked at how they will be applied in practice.
ALL AT SEA In a highly detailed presentation, Alphaliner’s executive consultant Tan Hua Joo looked at current developments in the container shipping business. This year is expected to set some new records – the highest concentration of ownership ever seen, with the ten largest lines controlling
68 per cent of the global containership fleet, and the passage of the first 10,000-teu ship through the Panama Canal. On the other hand, three global alliances
formed in 2015 and 2016 are set to dominate east-west trades, at a time when overall demand growth is at its lowest level since 2009. Average container freight rates are at record low levels – a Panamax vessel can be got for less than $5,000 a day - and the volume of idle ships is at a six-year
high.More than 450,000 teu of capacity is expected to be scrapped this year. Volatility in freight rates persists, while bunker prices have fallen by 40 per cent over the past year. Joo was firm in his analysis. Increased
market concentration has failed to improve the industry’s profitability. “The formation of new alliances is not a solution to the problem of over-capacity,” he said. And in the short term, the recent alliances and mergers have created instability as carriers jostle for market share. That instability has come at a difficult time.
In the short term global demand growth is expected to be as low as 1 or 2 per cent per year, compared to an average annual rate of 7.4 per cent from 2000 to 2015. Throughput at Chinese ports is growing at its slowest pace since 2009, with vessel supply now expected to outstrip demand for the fifth year in succession. Clearly, weakness in profitability is a simple
matter of supply and demand. Since peaking in the first quarter of 2015, rates on the Shanghai to east coast North America route have declined steadily, at a time when vessel capacity on the route has grown by 4 per cent. Over the same period, 40 per cent of capacity has been taken out of the Shanghai to east coast South America lane, which has delivered a sharp rise in rates since the first quarter of 2016. None of this should come as a surprise, though. The liner business has always suffered from over-capacity, poor profitability and
@TCO PRESIDENT REG LEE (ABOVE) WELCOMED A HAPPY BAND OF DELEGATES TO SINGAPORE
HCB MONTHLY | SEPTEMBER 2016
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