The products tanker market is set to fall away from the highs seen at the turn of the year, before recovering again once scrapping under the International Maritime Organisation’s new phase-out regime take effect in 2006-2007. 

According to 'Products Tanker Markets to 2010', produced by UK-based Ocean Shipping Consultants, the form chosen for the IMO's final agreement on the subject will see scrapping levels fall away in the short term, which with new tonnage coming on-stream and a slowdown in the world economy will see rates drop across the board. 

Under OSC's 'base case' scenario, average one-year time charter rates are predicated to fall from an average of US$16,500 per day for a 32,000 dwt products carrier to US$15,500 in 2002 and US$13,500 in 2003. 

Nevertheless, they will remain higher than comparable levels through the mid-1990s. Once scrapping picks up again, rates should rise to US$16,500 per day in 2007 before dropping back again to US$14,500 per day by 2010. 

In the short term, Middle Eastern products exports to Asia are expected to fall by just over 200,000 bpd. 

This, though, will be counteracted to an extent by a rise in intra-Asian movements of around 300,000 bpd as refineries, particularly in South Korea, expand. US imports should rise sharply, bolstering the Caribbean and Atlantic trades, while the Continent will see a small rise of around 130,000 bpd in its market. 

Increasing demand in countries such as China and India are expected to boost medium term demand, while over the long term long-haul movements from the Middle East to Asia are expected to rise strongly.

In the short term, it is expected that it will be the handy products carrier market that is expected to benefit, while things are less certain for tankers over 40,000 dwt. The latter will, though, benefit over the long term as Middle East-Asia trade picks up.