The shipowners operating on these routes had to deal with a tonnage overcapacity situation and with weak demand for transport to Asian destinations following the economic crisis affecting this region of the globe for more than a year.

This year the freight rates on deep-sea markets reached their lowest levels recorded since the beginning of the 1990s. Even though the slump in demand originating in the Asian countries was the main cause of the weakness of the market, its repercussions on freight rates were felt equally severely on the transatlantic market.

On this market the spot freight rates for 5000-tonne cargoes of easy chemicals on a Rotterdam / Houston route fell to an average of $17.50/tonne compared with about $22/tonne in 1997.

In the Houston / Rotterdam direction, the freight rates for 3000-tonne cargoes fell by about 40%, from $40/tonne in 1997 to $25/tonne in 1998.

Nevertheless, it should be emphasized that although the decrease in freight rates on the spot market was very large this year, the transatlantic market, unlike the Asian markets, remains highly structured in contract terms. Furthermore, the contracts were moving in the right direction this year.

On the ex-Europe market to the Asian countries, the freight rates for 2,000- to 3000-tonne cargoes decreased gradually by 35% to reach around $45/tonne at the end of the year.

At time of writing the contract renewal rates for the Asian market remained highly confidential.

The 1998 balance sheet for shipowners in the European coastal shipping markets (inter-Northern Europe, Northern Europe / Mediterranean and return) was not as catastrophic as it was for shipowners operating on the deep-sea routes. Although they agree in recognizing a fall in results compared with 1997, most shipowners operating in this region anticipated worse results given the decrease in volumes carried and a further increase in competition. The main advantage of the majority of these owners is the high level of contract coverage, often as much as 70% to 80% of the work, and their relatively low exposure to the fluctuations of the spot market.

The results of these owners were also helped by the firmness of the dollar against the European currencies and by the low bunker oil prices which contributed to reducing operating costs.

The European coastal shipping market held up at the 1997 level until May 1998. A sharp fall occurred in May-June 1998 in both volumes and rates. This depression persisted until the beginning of the autumn, but the slight volume recovery from the second half of October was not enough to generate an increase in rates. On the spot market the volume of European coastal shipping decreased by about half in 1998 and the freight rates fell by 20% to 25%. On average, carrier contracts should be renewed with potential reductions of 5% to 10% for 1999.

In conclusion, nobody expects an improvement in the freight market for 1999, and it may even be more difficult for the shipowners, many of whom will have to accept contract rates revised downwards.

For the long term, and in particular on the market for large parcel tankers on deep-sea routes, the owners remain fairly optimistic given the potential that this market maintains in the future, particularly in Asia. Demand will continue to grow in this region, but more slowly than over the last few years.

In parallel, the major newbuilding order programs now appear to be coming to an end, and a recovery in activity can be predicted for the chemical carrier market in 2000/2001, this phenomenon being accentuated by the recovery of the scrapping market expected in 1999.

Stolt Botan chemical parcel tanker 11,200 dwt blt 1998 by Fukoka operated by Stolt-NYK

In contrast to what we had observed over the previous three years, the number of second-hand transactions was very low. We recorded the sale of some 70 chemical carrier in 1997, whereas up to mid-December 1998 only 45 changed hands, including small unsophisticated product tankers.

The near-total disappearance of Far-East buyers affected this market very severely, as it had become accustomed to seeing these buyers absorb the major part of the tonnage offered for sale. Only China was still present, although very discreetly. Most of the buyers were therefore Europeans, coming from Scandinavia as well as the Mediterranean. As in previous years, few transactions involved modern ships, and this was no doubt exacerbated by the drop in the revenues procured by this type of ship in the present context. Examples include the resale of the M/T "Guevik", 8,300 dwt, IMO 2/3, for $18,500,000 and the sale of the M/T "Tasco II", a 4,450 dwt bitumen carrier built in 1995, for $11,000,000.

It appears clear that in this market the units remain in service longer than the large tankers and that any consolidation of the market will require the elimination of the oldest of them. This consolidation did not occur in 1998, since no less than 14 sales of ships built after 1976 were recorded. It is true that the shipowners can still use their aging chemical carriers on routes requiring less sophistication instead of scrapping them.