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Annual Report 2012

Annual Report 2012

chemical tanker

chemical tanker operators are mainly producers or consumers of chemical products, e.g. major industrialchemical companies, oil companies and mining companies.The figure below illustrates Eitzen Chemical’s main trade lanes.IMO regulationThe International Maritime Organization (“IMO”) is a specialized agency of the United Nations which isresponsible for measures to improve the safety and security of international shipping and to prevent marinepollution from ships. Some of these measures include issuing technical requirements that vessels must fulfil inorder to gain permission to transport oil products and chemicals. Product and chemical tankers can besegregated based on their IMO classification, which are quality grades for the permission to transport variouschemical and oil products. IMO I graded products are the most hazardous, IMO III the least hazardous. Ingeneral, IMO I and IMO II grade tankers are referred to as chemical tankers.Non-IMO / product tankers are classed as carriers for oil and oil products. In addition to oil and oil products,such as gasoline, non-IMO / product tankers can carry non-IMO liquids such as molasses and ethanol. IMO IIItankers are classed as carriers for oil and oil products as well as carriers for type III cargoes. Type III cargoesinclude, among others, methanol, MTBE, styrene, toluene, and chemical tankers transporting these cargoeshave to be classed as IMO III tankers (or better). IMO II tankers are classed as carriers for oil and oil products aswell as carriers for type III and type II cargoes. Type II cargoes include, among others, acids, fatty acids, xylene,white spirit and vegetable oils (e.g. palm oil, sunflower oil and soybean oil), and chemical tankers transportingthese cargoes have to be classed as IMO II tankers, although vegetable oils can be shipped in double hulledIMO III tonnage. The requirements for IMO II chemical tankers are the same as for IMO III chemical tankers,but with stricter requirements, e.g. with respect to tank size. IMO II tankers can transport both oil productsand type III and type II chemicals.IMO revised carriage requirements under Annex I (oil) and Annex II (noxious liquid substances in bulk whichmainly have to be carried by chemical tankers), with the aim of protecting the environment through stricterregulations. The revisions to Annex I have been implemented, with the result that single hull tankers had to bephased out within year end 2010, but with several exceptions. A fairly comprehensive revision has also beenmade to Annex II, which took effect on 1 January 2007. The revision has imposed stricter requirements on thecarriage of chemical products. A number of cargoes were moved from not being IMO categorised to requiringIMO III or even IMO II classed tankers. To illustrate this by means of some examples, xylene went fromrequiring IMO III tankers to requiring IMO II tankers. Methanol, MEG and MTBE went from no IMO10

equirement to requiring IMO III tankers. The most significant change in terms of volume was for vegetable oilsand soft oils which went from no IMO requirement to requiring IMO II (effectively meaning IMO III, but doublehull).Overview of current fleet and order bookThe chemical tanker market is relatively small in terms of number of vessels compared to the total tankermarket.The graph below gives an overview of the age distribution of the existing fleet of chemical tankers from 3,000to 54,000 dwt. The order book is estimated to represent about 6 per cent of the current fleet, reducedsignificantly from peak levels in 2008. The recent global economic recession and the financial turmoil have ledto significant newbuilding cancellations and it is still uncertain whether all newbuildings will be delivered.Current fleet of chemical tankers, 3k to 54k dwtSource: Eitzen Chemical based on industry sourcesEstimated fleet growthThe remaining orderbook for chemical tankers (tankers below 54,000 dwt) is about 6 per cent of the fleet,while the orderbook of smaller stainless steel vessels is only 2 per cent. In 2012, total deliveries ofnewbuildings were 1.8 million dwt, with scrapping of 1.2 million dwt, i.e. a net fleet growth of 0.6 million dwt,or 1.6 per cent.The fleet growth is to a great degree influenced by the level of scrapping of vessels. Scrapping is correlated tothe age and technical standard of a vessel. Further, the decision to scrap is strongly influenced by the freightmarket. In a weaker market the relative degree of scrapping is higher. Costs associated with dry-dockings andnew IMO regulations which will come into effect over the next years, are also expected to have a stronginfluence on the level of scrapping considering the opportunity cost for older vessel to meet newrequirements. Consequently, we expect the level of scrapping to remain at today’s level until the freightmarket experience more sustainable market improvement.If the relative level of scrapping in 2013 and 2014 equals scrapping in 2012, the net annual fleet growth thecoming years will be marginal. Based on the rapidly decreasing order book and estimated scrapping andremoval of older tonnage, the fleet growth is expected to be moderate going forward.11

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