Freight rates for used cooking oil (UCO) and sulphuric acid have nearly doubled through 2021 and while there are concerns that these markets could face demand destruction through high prices, tight supply and a lack of alternative products suggest that demand will remain on track this year, according to leading shipbroker Simpson Spence Young (SSY) in its 2022 Outlook Report, published on 21 January.

SSY wrote that sulphuric acid, phosphoric acid and UCO were major bulk commodities and important for the chemical tanker fleet, with Asia being a key supplier of sulphuric acids and UCO, and freights for both nearly doubling through 2021.

“Moreover, competition for other chemical and edible oil cargoes has been reduced, boosting freights for those.”

SSY said the situation in China would have a large impact on tonnage availability, and not just in Asia.

“Chinese authorities have placed restrictions on how many foreign ships a pilot is permitted to board, and the length of time the pilots must remain in quarantine afterwards. This has led to a shortage of pilots, and while berthing delays at some ports have eased, the more popular ports remain heavily congested, and this situation will continue into 2022.”

Edible oils account for about a third of seaborne chemical tanker trade.

In the dry bulk freight market, vessel earnings across all main bulker sizes in 2021 jumped to 13-year highs, buoyed by recovering demand outside China, with coal and iron ore prices spiralling to record levels, and smaller bulkers suddenly in demand for both container and de-containerised cargoes due to supply chain dislocations creating chronic capacity shortages in the container market.

Oilseeds are usually transported on Panamax vessels, which can carry 60,000-100,000 dwt of cargo, as well as on smaller Handymax (35,000-50,000dwt) or Supramax carriers (50,000-60,000dwt).

“In early January 2020, a 38,000 dwt Handysize bulker would have earned an average of around US$ 12,000/day, and a Supramax potentially even a little less,” the SSY report said.

“As we neared the midpoint of [2021], we saw rates of around US$28,000 and US$32,500 respectively, and highs points for both sectors neared US$40,000 per day.”

This also resulted in significant price rises for vessels.

“A 10-year-old 38,000 dwt Japanese Handysize at the start of the year would have cost the buyer US$11M, but around US$21M later in the year. A 10-year-old Chinese “Dolphin 57” Supramax has seen its value increase from US$8M in first quarter of 2021 to in

excess of US$19M at the high point towards the end of October.”

SSY Chairman Mark Richardson said that in looking at 2021 and drawing conclusions about the year ahead, Covid continued to be a constant presence.

“In sectors where pricing has been vulnerable to weakness, it dampens growth prospects and where there is tightness of supply it adds uncertainty and stokes volatility."