Having started in the second half of 2003, the improvement in freight rates of chemical product carriers reached record heights this year, which have not been seen since the preceding periods of tensions in 1991 and 1995. This revival, which lasts for more than a year, shows no signs of losing pace at the start of 2005. It was however paradoxical that the market was one of the few not to follow the general rise in the movement earlier, which was set by the dry bulk shipping market, oil tankers and containerships. Sooner or later the chemical products should follow this upward spiral of the other shipping sectors.

It was high time for all participants that the market found its balance, for the last ten years the surplus tonnage kept the level of freight rates often below running costs, which resulted in owners ending up with their balance sheets in the red. In order not to slip further down or go under, the market has seen all over the year the formation of pools or other partnership agreements.

This year again some changes have been carried out, with the Vopak Essberger pool renamed Broere Essberger Chempool, but with a single shareholder. Ahrenkiel has left the UCT pool and with Odfjell they have formed a new pool for inter-European movements: Odfjell Ahrenkiel Europe GmbH. In response, Schoeller, the other partner in UCT, has associated with Seatrans to form United Seatrans Chempool. Too much out on a limb in this market, Naviera Quimica and la Navale Francaise have been bought by Camillo Eitzen, who, with his other ships coming out of Copenhagen Tankers, will operate a fleet of 25 chemical carriers.

On all European routes, spot freight rates have been continuously on the rise with an even more significant increase between September and December. The North European market has naturally profited from this improvement, but very often the majority of owners did not have the opportunity to take an interest in the spot market being largely covered with contracts.

With few offers, and therefore less competition, freight rates increased by 20 to 30 % on average over the year. The rise in bunkers costs should be taken into account in the operational results, but with virtually all transactions being in the European currency, this has allowed owners to stay in line with the currency of their fixed costs.

Mediterranean movements are always split in two, with on one hand the older 'unapproved' ships and on the other hand the modern ships. But contrary to previous years all ships benefited from the improved freight rates. Demand for 'unapproved' ships, but with stainless steel tanks, was very strong in Eastern Mediterranean and notably in the Black Sea for acid movements. Nonetheless a large number of ships disappeared from the fleet, with owners not hesitating between the high maintenance costs and the very attractive rates being offered for scrap, but renewal of these ships is not taking place in the Mediterranean. There are openings in this market for owners in search of new outlets, but rates should rise further, or at least stabilise at current levels which have followed the same hike in Northern Europe.

The strategy of owners for renewing contracts has considerably evolved. Generally speaking, owners who have until now not been able to benefit from the rise in the spot market (being too committed on their contracts) now ask for a minimum and a maximum on the negotiated quantities, in order to be able to participate in the spot market when it is attractive. Open contracts are disappearing, as they allow charterers to play on the spot market when it drops and to take up the 100 % allowance with their contractual partner when it rises.

• Long haul movements

On movements from the U.S. to Europe,

Deliveries of new chemical carriers with stainless steel tanks reached a record level in 2004 with some fifty ships for a total of 800,000 dwt, which brings the average age of the combined fleet to 11.7 years. Sizes of ships are also well distributed, with 16 ships between 5,000 and 10,000 dwt, 15 ships between 10,000 and 20,000 dwt and a dozen above 20,000 dwt. The orderbook is also filled, with more than 60 ships to be delivered in 2005 of which half between 15,000 and 20,000 dwt. More than 80 % of the ships delivered this year were built in Japan and in 2005 we will witness the first deliveries of newbuildings out of China (5 units). Deliveries beyond 2005 are for the moment far fewer, with 30 ships expected in 2006 and 15 ships in 2007.

Demolition of chemical carriers has doubled this year with 21 ships sold for scrap for 220,000 dwt. This trend should continue as 138 ships of more than 20 years are still in service, of which 70 are more than 25 years.

2004 has thus been a good year for owners, but it will remain above all a year full of promises for the future ' or at least the next two years. Starting from 2005, freight contracts renegotiated at higher levels will begin to generate a supplementary revenue to owners. Delivery of newbuildings, although significant, should only serve to replace the older ships leaving the fleet.

In effect, the quality measures imposed by charterers combined with the new directives set out by the IMO beginning in 2007 for the transport of vegoils (imposing IMO III ships but with a double-hull) will mean that a number of large units will disappear from the market. Modern ships will thus be greatly solicited. It should be added that shipyards are currently fully booked, plus the fact that the price of steel is prohibitive for orders of chemical carriers fitted with stainless steel tanks.

In the past we have experienced peaks in the market but generally over fairly short periods. The current situation is new and seems to be solid, without any major accidents or a decline in economic activity, this should continue to last quite some time.