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The Chemical Tanker Market Is undersupplied

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    2. This presentation is aimed at those who are perhaps not very familiar with the world of oils and fats. In the history of this conference it may be the first time such a paper has been delivered and I am happy to give it. Many owners have never spent much time on the subject To fix all we need is to be 50 cents lower on freight. Many charterers of oils and fats have not been selective on who the actual operators were If it floats fix it. Well times are changing the future looks optimistic and change brings opportunity for all of us. We will look at what oils and fats really are, their volumes compared to other chemicals, new drivers of growth, changes in use, leading to changes in ship types, previous cargoes and new factors, including the effect of crude petroleum pricing, comparative earnings and some of the challenges and investment opportunities presentedThis presentation is aimed at those who are perhaps not very familiar with the world of oils and fats. In the history of this conference it may be the first time such a paper has been delivered and I am happy to give it. Many owners have never spent much time on the subject To fix all we need is to be 50 cents lower on freight. Many charterers of oils and fats have not been selective on who the actual operators were If it floats fix it. Well times are changing the future looks optimistic and change brings opportunity for all of us. We will look at what oils and fats really are, their volumes compared to other chemicals, new drivers of growth, changes in use, leading to changes in ship types, previous cargoes and new factors, including the effect of crude petroleum pricing, comparative earnings and some of the challenges and investment opportunities presented

    3. On the 1st January 2007 oils and fats will finally be recognised as organic chemicals and as Janet explains in the previous paper will only be carried by IMO classed chemical tankers. Being triacylglycerols they belong to the ester family of chemicals and their main components are mixtures of triglycerides from various fatty acids. So that you can more easily absorb this profound statement I will try to use the term triacylglycerols whenever practicable for the rest of the presentation They could be grouped by volume into the broad designation of organic chemicals, but the trade has always kept them separate, as triacylglycerols have been treat differently to chemicals and petroleum for carriage by sea, mainly due to the acceptable previous cargo issues, but also because they could be carried on non IMO ships.On the 1st January 2007 oils and fats will finally be recognised as organic chemicals and as Janet explains in the previous paper will only be carried by IMO classed chemical tankers. Being triacylglycerols they belong to the ester family of chemicals and their main components are mixtures of triglycerides from various fatty acids. So that you can more easily absorb this profound statement I will try to use the term triacylglycerols whenever practicable for the rest of the presentation They could be grouped by volume into the broad designation of organic chemicals, but the trade has always kept them separate, as triacylglycerols have been treat differently to chemicals and petroleum for carriage by sea, mainly due to the acceptable previous cargo issues, but also because they could be carried on non IMO ships.

    4. The raw materials for triacylglycerols come from many parts of the world both from vegetable and animal origin. A large proportion of the oils such as coconut, palm and palm kernel oil are supplied from tropical countries whilst more temperate climates allow the harvesting and subsequent production of soybean, rape and sunflower oils. Wood or tall oil is another source , and is a by-product from the paper pulp industry. Animal fat is obtained from the meat industry, beef tallow being the most abundantly available fat. The Fishing industry is the source for fish oils. The raw materials are available annually and are also truly renewable. The raw materials for triacylglycerols come from many parts of the world both from vegetable and animal origin. A large proportion of the oils such as coconut, palm and palm kernel oil are supplied from tropical countries whilst more temperate climates allow the harvesting and subsequent production of soybean, rape and sunflower oils. Wood or tall oil is another source , and is a by-product from the paper pulp industry. Animal fat is obtained from the meat industry, beef tallow being the most abundantly available fat. The Fishing industry is the source for fish oils. The raw materials are available annually and are also truly renewable.

    5. In 1985 total seaborne trade of liquid chemicals was around 57.8 million tons of which organic chemicals were 20.9 million (36%), triacylglycerols 15 million (26%), inorganics 11.9 million (19%) and others 10 million (17%). Over the 22 year period from 1985 to 2007 the grand total will have increased by 259%, to 150.1 million tons triacylglycerols with a 324% increase to 48.6 million tons, and organic chemicals experiencing a 318% increase from 20.9 to 65.7 million tons. The average total annual increase was 4.5%, whereas the average increase for both organic chemicals and triacylglycerols was 5.3%, however over the period 2000 to 2007, the growth of triacylglycerols will average close to 6% with organics closer to 4%. In 1985 total seaborne trade of liquid chemicals was around 57.8 million tons of which organic chemicals were 20.9 million (36%), triacylglycerols 15 million (26%), inorganics 11.9 million (19%) and others 10 million (17%). Over the 22 year period from 1985 to 2007 the grand total will have increased by 259%, to 150.1 million tons triacylglycerols with a 324% increase to 48.6 million tons, and organic chemicals experiencing a 318% increase from 20.9 to 65.7 million tons. The average total annual increase was 4.5%, whereas the average increase for both organic chemicals and triacylglycerols was 5.3%, however over the period 2000 to 2007, the growth of triacylglycerols will average close to 6% with organics closer to 4%.

    6. Last century world population exploded. It took only 37 years to double to 5.5 Billion by 1992 but annual growth has slowed considerably. The UN expects the world total to grow by one third from 1990 to 2010 to just over 7 Billion (91-94 Million annually). 93% of growth will occur in the less well developed regions but these countries will achieve the highest income growth thereby causing increased oils and fats demand. In 1990 with a world population of 5.3 Billion and oils and fats production of 81 million tons per capita consumption was 15.25 kgs/annum per year. If the per capita increase of the previous 20 years was maintained by the year 2010 it would average 21.5 kg/.yr and with a population increase of 1.8 billion this could mean the world requires a total production of 150 million tons!. However Oil World forecasts are for a per capita of 18.5 which would give a more conservative figure of 132 Million tons, but we are in 2005, and world production is very close to this, so I am sticking by my 150 million tons by 2010. Whilst bulk movements by sea are currently 30% of total y production it would seem reasonable to assume that up to 32% or more will have to move by the year 2010 as Palm will be the predominant raw material for the consumer. So shipping requirements would conservatively move up close to 50 million tons and in the process of catching up with organic chemicals as the single biggest commodity moved by the Parcel Tanker trade!Last century world population exploded. It took only 37 years to double to 5.5 Billion by 1992 but annual growth has slowed considerably. The UN expects the world total to grow by one third from 1990 to 2010 to just over 7 Billion (91-94 Million annually). 93% of growth will occur in the less well developed regions but these countries will achieve the highest income growth thereby causing increased oils and fats demand. In 1990 with a world population of 5.3 Billion and oils and fats production of 81 million tons per capita consumption was 15.25 kgs/annum per year. If the per capita increase of the previous 20 years was maintained by the year 2010 it would average 21.5 kg/.yr and with a population increase of 1.8 billion this could mean the world requires a total production of 150 million tons!. However Oil World forecasts are for a per capita of 18.5 which would give a more conservative figure of 132 Million tons, but we are in 2005, and world production is very close to this, so I am sticking by my 150 million tons by 2010. Whilst bulk movements by sea are currently 30% of total y production it would seem reasonable to assume that up to 32% or more will have to move by the year 2010 as Palm will be the predominant raw material for the consumer. So shipping requirements would conservatively move up close to 50 million tons and in the process of catching up with organic chemicals as the single biggest commodity moved by the Parcel Tanker trade!

    7. It becomes more obvious looking at this slide why the two most populous nations, China and India, both showing the strongest GDP growth will drive demand well into the future, as their more urban and prosperous populations increase their consumption of oils and fatsIt becomes more obvious looking at this slide why the two most populous nations, China and India, both showing the strongest GDP growth will drive demand well into the future, as their more urban and prosperous populations increase their consumption of oils and fats

    8. Its hard to believe that when I left the sea in 1980 to my first shore job in Kuala Lumpur China imported less than 150,000 tons of oils and fats per year and the average per caput consumption in China was only 4.4 kgs per year. In 2005 China will import more than 6.5 million tons with the average caput consumption rising to 18 kgs thats a 4,300 % increase over 25 years. Although it has been overtaken by India in annual growth, Chinas population will still be the largest in 2020, and should remain the number one during the next two decades. Perhaps the realisation that the Chinese population grows the equivalent of the total population of the USA every 20 years places things into perspective! The composition of the Chinese population is also changing rapidly. In 1980 the urban population had only been 19.4% of the total. By 1999 it grew to 30.9% of the total. This development has to a considerable extent contributed to the unusually sharp increase in Chinese consumption of oils and fats, livestock products and oil meals as the per caput income of the urban population and thus its consumption is much higher than that of the rural residents. The latter's share of the total population declined from 80.6% in 1980 to 69.1% in 1999. By 2016-20 the degree of self-sufficiency in oils and fats may decline to 69% and the gap between domestic production and disappearance to rise much more sharply to 10.1 million tons. Its hard to believe that when I left the sea in 1980 to my first shore job in Kuala Lumpur China imported less than 150,000 tons of oils and fats per year and the average per caput consumption in China was only 4.4 kgs per year. In 2005 China will import more than 6.5 million tons with the average caput consumption rising to 18 kgs thats a 4,300 % increase over 25 years. Although it has been overtaken by India in annual growth, Chinas population will still be the largest in 2020, and should remain the number one during the next two decades. Perhaps the realisation that the Chinese population grows the equivalent of the total population of the USA every 20 years places things into perspective! The composition of the Chinese population is also changing rapidly. In 1980 the urban population had only been 19.4% of the total. By 1999 it grew to 30.9% of the total. This development has to a considerable extent contributed to the unusually sharp increase in Chinese consumption of oils and fats, livestock products and oil meals as the per caput income of the urban population and thus its consumption is much higher than that of the rural residents. The latter's share of the total population declined from 80.6% in 1980 to 69.1% in 1999. By 2016-20 the degree of self-sufficiency in oils and fats may decline to 69% and the gap between domestic production and disappearance to rise much more sharply to 10.1 million tons.

    9. In India domestic production of vegetable oils is not coming up to expectations, and imports of oils and fats are expected to rise by 0.6 Million tons to approximately 5.2 million tons. In India the annual average growth of consumption over the last 3 years has been an additional 560 thousand tons per annum mainly due to 1) The liberalisation of edible oil imports 2) Further growth in oilseed production 3) Rising per caput consumption from a very low level. 4) Good economic growth Oil World are predicting growth of import close to 8 million tons by 2010In India domestic production of vegetable oils is not coming up to expectations, and imports of oils and fats are expected to rise by 0.6 Million tons to approximately 5.2 million tons. In India the annual average growth of consumption over the last 3 years has been an additional 560 thousand tons per annum mainly due to 1) The liberalisation of edible oil imports 2) Further growth in oilseed production 3) Rising per caput consumption from a very low level. 4) Good economic growth Oil World are predicting growth of import close to 8 million tons by 2010

    10. According to APAG, the European Oleo-chemicals and Allied Products Group the total world production of oils and fats in 1997 amounted to 100 million tons, of which 80 million were of vegetable and 20 million tons of animal origin. More than 80% were then used for human nutrition. Half of the remaining part was used in the animal feed industry. Meanwhile the chemical industry actually consumed around 14 % of the total production. World wide consumption of basic natural oleo-chemicals (fatty acids, fatty alcohols, and glycerine) then was estimated to be 3.5 million tons. More than one third of that produced in Western Europe. In 2005 world production of triacylglycerols has risen to around 136 Million and by the end of 2007 will have increased by close to 50% towards 150 million tons! The % share of use by the chemical industry will have then also risen to around 18-20%, and the percentage of that will be used as a feedstock for energy use could even be approaching double figures as a feedstock for energy use. We should also not overlook the fact that according to some pundits the world will run out of fossil fuels in 45 years time. According to APAG, the European Oleo-chemicals and Allied Products Group the total world production of oils and fats in 1997 amounted to 100 million tons, of which 80 million were of vegetable and 20 million tons of animal origin. More than 80% were then used for human nutrition. Half of the remaining part was used in the animal feed industry. Meanwhile the chemical industry actually consumed around 14 % of the total production. World wide consumption of basic natural oleo-chemicals (fatty acids, fatty alcohols, and glycerine) then was estimated to be 3.5 million tons. More than one third of that produced in Western Europe. In 2005 world production of triacylglycerols has risen to around 136 Million and by the end of 2007 will have increased by close to 50% towards 150 million tons! The % share of use by the chemical industry will have then also risen to around 18-20%, and the percentage of that will be used as a feedstock for energy use could even be approaching double figures as a feedstock for energy use. We should also not overlook the fact that according to some pundits the world will run out of fossil fuels in 45 years time.

    11. The conventional technologies used to produce oleo-chemicals are shown in this slide. The feed stocks shown are the lauric oils favoured by the oleo-chemical producers in South East Asia, looking for shorter chain fatty acids for their downstream fatty alcohol production, but any triacylglycerol can be used to produce the methyl esters. Whilst the methyl esters produced in the slides trans-esterification process are then hydrogenated to produce fatty alcohols they can also be effectively used as an additive or replacement for diesel. Bio diesel therefore refers to methyl or ethyl esters derived from oils and fats. The trans-esterification process is:- Oil or Fat + Straight Chain Alcohol + Catalyst =Mono Alkyl Ester + Glycerol i.e. Soyabean Oil + Methanol + Sodium Hydroxide= Methyl Oleate (Bio Diesel) + Glycerine The dominant factor in bio-diesel production is the feedstock cost, with capital cost contributing only about 7 % of the final product cost, and despite tariff incentives to European farmers there must be the probability of palm oil being imported direct into Europe under fuel grade terms and conditions. The concept of using oils and fats as a fuel dates back to 1895 when Dr Rudolf Diesel developed the worlds first diesel engine to run on vegetable oil. He successfully demonstrated his engine at the world exhibition in Paris in 1900 using peanut oil. The conventional technologies used to produce oleo-chemicals are shown in this slide. The feed stocks shown are the lauric oils favoured by the oleo-chemical producers in South East Asia, looking for shorter chain fatty acids for their downstream fatty alcohol production, but any triacylglycerol can be used to produce the methyl esters. Whilst the methyl esters produced in the slides trans-esterification process are then hydrogenated to produce fatty alcohols they can also be effectively used as an additive or replacement for diesel. Bio diesel therefore refers to methyl or ethyl esters derived from oils and fats. The trans-esterification process is:- Oil or Fat + Straight Chain Alcohol + Catalyst =Mono Alkyl Ester + Glycerol i.e. Soyabean Oil + Methanol + Sodium Hydroxide= Methyl Oleate (Bio Diesel) + Glycerine The dominant factor in bio-diesel production is the feedstock cost, with capital cost contributing only about 7 % of the final product cost, and despite tariff incentives to European farmers there must be the probability of palm oil being imported direct into Europe under fuel grade terms and conditions. The concept of using oils and fats as a fuel dates back to 1895 when Dr Rudolf Diesel developed the worlds first diesel engine to run on vegetable oil. He successfully demonstrated his engine at the world exhibition in Paris in 1900 using peanut oil.

    12. The total exports of Oleo-Chemicals from Malaysia and Indonesia for 2004 are close to 2.5 million tons, with Malaysian exports representing around two thirds of these combined totals. The Far East being the largest market, closely followed by Europe. There is forecasted to be a 10.5% growth of new oleo-chemicals plants leading up to 2007, with an additional 310,000 tons coming on stream in Malaysia, and 260,000 in Indonesia Region (2004) Quantity N. Asia 749371 S. Asia 224106 Europe 725994 USA 271261 Others 482709 Needless to say these volumes are very important cargoes for the sophisticated ocean chemical carriers, and are mainly contracted with the major owners The total exports of Oleo-Chemicals from Malaysia and Indonesia for 2004 are close to 2.5 million tons, with Malaysian exports representing around two thirds of these combined totals. The Far East being the largest market, closely followed by Europe. There is forecasted to be a 10.5% growth of new oleo-chemicals plants leading up to 2007, with an additional 310,000 tons coming on stream in Malaysia, and 260,000 in Indonesia Region (2004) Quantity N. Asia 749371 S. Asia 224106 Europe 725994 USA 271261 Others 482709 Needless to say these volumes are very important cargoes for the sophisticated ocean chemical carriers, and are mainly contracted with the major owners

    13. Here are some key features to take into consideration on the European front: 1) Oil World estimate actual production of bio-diesel to reach 2.7-2.8 million tons in Jan/Dec 2005 compared with 2.0 million last year, 1.5 million in calendar year 2003 and 0.7 million in 2000. Most of the production will take place in Germany, approaching an estimated 1.4 million in 2005. But rapidly expanding production is expected in coming years in France, the UK, the Netherlands and other EU member states. 2) The EU has an ambitious target to cover 5.75% of diesel fuel consumption with bio-diesel by the year 2010. This would be equivalent to approximately 13 million tons. But in Oil Worlds assessment there is no chance to reach this goal. They expect that bio-diesel production will trail the anticipated targets, but still reach 7.5 million tons by the year 2010. They expect that a growing portion of future bio-diesel production will be produced from soya oil, animal fats and palm oil. One limitation for future expansion of rape oil usage for bio-fuels will be insufficient growth of rapeseed and oil production, as well as price.Here are some key features to take into consideration on the European front: 1) Oil World estimate actual production of bio-diesel to reach 2.7-2.8 million tons in Jan/Dec 2005 compared with 2.0 million last year, 1.5 million in calendar year 2003 and 0.7 million in 2000. Most of the production will take place in Germany, approaching an estimated 1.4 million in 2005. But rapidly expanding production is expected in coming years in France, the UK, the Netherlands and other EU member states. 2) The EU has an ambitious target to cover 5.75% of diesel fuel consumption with bio-diesel by the year 2010. This would be equivalent to approximately 13 million tons. But in Oil Worlds assessment there is no chance to reach this goal. They expect that bio-diesel production will trail the anticipated targets, but still reach 7.5 million tons by the year 2010. They expect that a growing portion of future bio-diesel production will be produced from soya oil, animal fats and palm oil. One limitation for future expansion of rape oil usage for bio-fuels will be insufficient growth of rapeseed and oil production, as well as price.

    14. 3) Consumption of rape oil for the production of bio-diesel is expected to increase to 3.7-3.8 million tons by 2009/10, representing a steep increase from the 2.4 million estimated for the current season 2004/05. They expect only a moderate growth in future consumption of rape oil for food in the EU, while rape oil usage for bio-diesel production will increase more rapidly and may account for 55% of total rape oil demand in 5 years. .4) Until recently more than 90% of biodiesel in the EU was produced from rape oil. But this has created high price premiums over soya oil and other oils/fats. In the medium to longer term soya oil, palm oil and animal fats will be increasingly used for biodiesel production destined for admixture to diesel fuel of 3-5%. 5) Not included in the above is the consumption of vegetable and animal oils & fats for production of electricity. With the current direct and indirect subsidies granted by governments in the EU, there is also a clear trend of shifting to vegetable oils in the electricity producing industry. This is a major outlet for palm oil and is likely to absorb at least 0.8-1.0 million tons of palm oil in Jan/Dec 2005. 6) The dynamics of the demand for vegetable and animal oils & fats as renewable fuels are very strong, particularly at current prices and in the current framework of various government support measures. The biggest growth is currently taking place in the European Union, but consumption of green energy or bio-fuels is also stepped up in the USA, Brazil, Malaysia and many other countries. 7) The additional demand will have a considerable price impact and it remains to be seen how far prices of oils & fats will have to appreciate to generate sufficient production. There is the risk that the growth in the consumption of oils & fats as green energy will outpace availabilities in 2006 and 2007. Much will depend on the future policies (budget constraints?) as well as on the price developments of crude mineral oil.3) Consumption of rape oil for the production of bio-diesel is expected to increase to 3.7-3.8 million tons by 2009/10, representing a steep increase from the 2.4 million estimated for the current season 2004/05. They expect only a moderate growth in future consumption of rape oil for food in the EU, while rape oil usage for bio-diesel production will increase more rapidly and may account for 55% of total rape oil demand in 5 years. .4) Until recently more than 90% of biodiesel in the EU was produced from rape oil. But this has created high price premiums over soya oil and other oils/fats. In the medium to longer term soya oil, palm oil and animal fats will be increasingly used for biodiesel production destined for admixture to diesel fuel of 3-5%. 5) Not included in the above is the consumption of vegetable and animal oils & fats for production of electricity. With the current direct and indirect subsidies granted by governments in the EU, there is also a clear trend of shifting to vegetable oils in the electricity producing industry. This is a major outlet for palm oil and is likely to absorb at least 0.8-1.0 million tons of palm oil in Jan/Dec 2005. 6) The dynamics of the demand for vegetable and animal oils & fats as renewable fuels are very strong, particularly at current prices and in the current framework of various government support measures. The biggest growth is currently taking place in the European Union, but consumption of green energy or bio-fuels is also stepped up in the USA, Brazil, Malaysia and many other countries. 7) The additional demand will have a considerable price impact and it remains to be seen how far prices of oils & fats will have to appreciate to generate sufficient production. There is the risk that the growth in the consumption of oils & fats as green energy will outpace availabilities in 2006 and 2007. Much will depend on the future policies (budget constraints?) as well as on the price developments of crude mineral oil.

    15. The effect of crude petroleum prices Crude Oil at Record $ 70 per Barrel These are truly historic times for vegetable oils. Crude mineral oils have exceeded prices of oils and fats on the world market for the first time. Substitution of crude mineral oil with oils and fats could be so big that available stocks of vegetable oils could be disposed of in no time. Hurricane Katrina has contributed to the rally, and other reasons have been the shortage of production and CPP refining capacities worldwide as well as the increased demand, particularly from China and India. Substitution is now economically feasible even without tax exemptions or other government subsidies. The impact is even greater in the European Union and other countries where several government support measures have come in place to stimulate usage of vegetable oils as renewable fuel for the production of bio-diesel or for electricity and heat. At the moment there are capacity constraints for the production of bio-diesel, but the production of electricity and heat - - where esterification is not necessary and where the vegetable oils are just used - - becomes a more sharply rising outlet for palm and soya oils. Impacts Recently oils and fats prices were stuck in a rather narrow range. The market had no backbone and no vision, which resulted in reserved buying policy of many consumers. Not taking sufficient coverage for future requirements can be very dangerous for edible oil consumers in the current environment. Unless crude mineral oil prices drop by $ 10-15 per barrel within the next several weeks, there is a big potential that accelerating substitution with vegetable oils will lead to a sharp reduction of vegetable oil stocks. On August 26 OIL WORLD pointed out that world demand for oils and fats is going to increase by a stunning 6.3 million tons in Oct/Sept 2004/05. The risk is that additional substitution in the crude mineral oil industry will further increase total demand for vegetable oils and result in very low stocks. Crude mineral oil prices remaining between US-$ 60- 70 (or above) could create a rally in soya/palm prices by at least US-$ 70-100 per tonne by early 2006. Crude Oil at Record $ 70 per Barrel These are truly historic times for vegetable oils. Crude mineral oils have exceeded prices of oils and fats on the world market for the first time. Substitution of crude mineral oil with oils and fats could be so big that available stocks of vegetable oils could be disposed of in no time. Hurricane Katrina has contributed to the rally, and other reasons have been the shortage of production and CPP refining capacities worldwide as well as the increased demand, particularly from China and India. Substitution is now economically feasible even without tax exemptions or other government subsidies. The impact is even greater in the European Union and other countries where several government support measures have come in place to stimulate usage of vegetable oils as renewable fuel for the production of bio-diesel or for electricity and heat. At the moment there are capacity constraints for the production of bio-diesel, but the production of electricity and heat - - where esterification is not necessary and where the vegetable oils are just used - - becomes a more sharply rising outlet for palm and soya oils. Impacts Recently oils and fats prices were stuck in a rather narrow range. The market had no backbone and no vision, which resulted in reserved buying policy of many consumers. Not taking sufficient coverage for future requirements can be very dangerous for edible oil consumers in the current environment. Unless crude mineral oil prices drop by $ 10-15 per barrel within the next several weeks, there is a big potential that accelerating substitution with vegetable oils will lead to a sharp reduction of vegetable oil stocks. On August 26 OIL WORLD pointed out that world demand for oils and fats is going to increase by a stunning 6.3 million tons in Oct/Sept 2004/05. The risk is that additional substitution in the crude mineral oil industry will further increase total demand for vegetable oils and result in very low stocks. Crude mineral oil prices remaining between US-$ 60- 70 (or above) could create a rally in soya/palm prices by at least US-$ 70-100 per tonne by early 2006.

    16. Well we have looked at the volumes, and major changes in use but what do these changes mean for world shipping? Previous cargo requirements hold the key to the availability of freight. Oils and fats for Edible and or Oleo-chemical use are shipped using one of the following previous cargo criteria 1. Not on the FOSFA Banned List- (Standard FOSFA Contract- Assumed as minimum global standard) 2. Immediate Previous cargo on the FOSFA Acceptable List- 3. Immediate Previous cargo on EU 1 or 2 Acceptable List 4. Immediate previous cargo on NIOP 1 or 2 List The previous cargo lists are produced by the Trade Associations, stipulated in their contracts between buyer and seller, but are not enforced by law, however the EU list is, and the NIOP lists have the full support of the FDA. The rest of the world still relies on the buyer and seller to agree terms, albeit the United Nations under Codex keeps a watchful eye on all matters Well we have looked at the volumes, and major changes in use but what do these changes mean for world shipping? Previous cargo requirements hold the key to the availability of freight. Oils and fats for Edible and or Oleo-chemical use are shipped using one of the following previous cargo criteria 1. Not on the FOSFA Banned List- (Standard FOSFA Contract- Assumed as minimum global standard) 2. Immediate Previous cargo on the FOSFA Acceptable List- 3. Immediate Previous cargo on EU 1 or 2 Acceptable List 4. Immediate previous cargo on NIOP 1 or 2 List The previous cargo lists are produced by the Trade Associations, stipulated in their contracts between buyer and seller, but are not enforced by law, however the EU list is, and the NIOP lists have the full support of the FDA. The rest of the world still relies on the buyer and seller to agree terms, albeit the United Nations under Codex keeps a watchful eye on all matters

    17. Oleo chemicals fall outside FOSFA-NIOP-EU Hygiene Legislative & are carried by IMO Class ships, under quality requirements similar to other high quality chemical cargoes carried in the chemical tanker trade and are agreed and/or negotiated between the charterer and owner Kosher could be a requirement for glycerine. Methyl Esters used for fuel are currently moving on the previous cargo terms as clean petroleum, and moving already into Europe from the United StatesOleo chemicals fall outside FOSFA-NIOP-EU Hygiene Legislative & are carried by IMO Class ships, under quality requirements similar to other high quality chemical cargoes carried in the chemical tanker trade and are agreed and/or negotiated between the charterer and owner Kosher could be a requirement for glycerine. Methyl Esters used for fuel are currently moving on the previous cargo terms as clean petroleum, and moving already into Europe from the United States

    18. For the past 30 years trade associations such as FOSFA International and the NIOP have been addressing the basic standards of marine transportation within their sales contracts. The introduction of the banned list followed shortly by the Acceptable list in Europe resulted in no contaminations being reported for several years. It just so happens that contamination that occurred previously was in coated, partially coated or mild steel (uncoated) space. No contaminations have ever been associated with stainless steel space. Meanwhile whilst the trade was wrestling with the contamination issue, something very significant had, and continues to develop in the parcel tanker world. Almost without exception parcel tankers are being fully constructed of stainless steel. This phenomenon is driven by the quality criteria of customers in the chemical trade. Their criteria requires smooth profiled tanks, with very efficient stripping capability, constructed of material that gives no risk of absorption by previous cargoes, able to be cleaned and deodorised to very high temperatures in order to ensure product purity. A recognition, to a degree, of the special qualities of stainless steel was achieved in 2001 with the following being included in the revised FOSFA Qualification for ships engaged in the carriage of oils and fats in bulk for edible and oleo chemical use of that year. "Ships tanks which have been newly coated or fully recoated, or stainless steel tanks that have been cleaned and passivated under the supervision of a qualified independent surveyor in a dry dock/shipyard/repair facility, where the ship must have spent a minimum period of 7 consecutive days, shall be considered as new buildings. Cargoes carried prior to the date of such coating or passivation shall not be considered as relevant. The ship owner is required to provide the independent certification of such procedures and to declare the three immediate previous cargoes carried." Since then INTERTANKO have been working with FOSFA on a relaxation of the repair period restriction, and conducting tests afloat to formulate acceptable procedures for the process and inspection of stainless tank preparation to satisfy concerns. Any break through here will have a substantial impact on reducing freight costs by utilisation of such quality tonnage; nevertheless there is still a strong lobby for dedicated carriers of oils and fats For the past 30 years trade associations such as FOSFA International and the NIOP have been addressing the basic standards of marine transportation within their sales contracts. The introduction of the banned list followed shortly by the Acceptable list in Europe resulted in no contaminations being reported for several years. It just so happens that contamination that occurred previously was in coated, partially coated or mild steel (uncoated) space. No contaminations have ever been associated with stainless steel space. Meanwhile whilst the trade was wrestling with the contamination issue, something very significant had, and continues to develop in the parcel tanker world. Almost without exception parcel tankers are being fully constructed of stainless steel. This phenomenon is driven by the quality criteria of customers in the chemical trade. Their criteria requires smooth profiled tanks, with very efficient stripping capability, constructed of material that gives no risk of absorption by previous cargoes, able to be cleaned and deodorised to very high temperatures in order to ensure product purity. A recognition, to a degree, of the special qualities of stainless steel was achieved in 2001 with the following being included in the revised FOSFA Qualification for ships engaged in the carriage of oils and fats in bulk for edible and oleo chemical use of that year. "Ships tanks which have been newly coated or fully recoated, or stainless steel tanks that have been cleaned and passivated under the supervision of a qualified independent surveyor in a dry dock/shipyard/repair facility, where the ship must have spent a minimum period of 7 consecutive days, shall be considered as new buildings. Cargoes carried prior to the date of such coating or passivation shall not be considered as relevant. The ship owner is required to provide the independent certification of such procedures and to declare the three immediate previous cargoes carried." Since then INTERTANKO have been working with FOSFA on a relaxation of the repair period restriction, and conducting tests afloat to formulate acceptable procedures for the process and inspection of stainless tank preparation to satisfy concerns. Any break through here will have a substantial impact on reducing freight costs by utilisation of such quality tonnage; nevertheless there is still a strong lobby for dedicated carriers of oils and fats

    19. So for the uninitiated what sort of sailed in results would they have had over the last seven years if they had operated in the dedicated vegoil trade, that is to say only operating in the world of acceptable previous cargoes for oils and fats. More importantly what sort of strategic advantage would they have in the future if they entered the trade? The above voyage estimates are based on a 35,000 DWT vessel, loading 33,000 tons of cargo, consuming around 32 mt of HFO, and 3 tpd MDO, plus allowances for heating and cleaning, the voyages reflect the bunker costs and freight rates at the time and assume 250TPH for palm, 300 TPH for UAN, 200 TPH for soft Oils and average rates for molasses. The average dedicated voyage earnings are compared to the average reported time charter equivalents of a vessel of 30/32,000 DWT in the Drewry chemical and product trade for a relatively simple and equivalent vessel of IMO 3 double hull capability. The highlighted results in yellow indicate that such a vessel could have made marginally more. In the past the oils and fats trade has swung with the CPP trade but with the expected pressure on oils and fats freight, and the difficulty of programming previous cargoes to enter the trade should it take off, more owners previously committed to the CPP trade with all its inherent volatility may now be prepared to switch a strategic number of their ships to the oils and fats trade. We are already aware of major traders and producers taking up dialogues with owners for longer term commitments, which is good news for the stability of the trade. So for the uninitiated what sort of sailed in results would they have had over the last seven years if they had operated in the dedicated vegoil trade, that is to say only operating in the world of acceptable previous cargoes for oils and fats. More importantly what sort of strategic advantage would they have in the future if they entered the trade? The above voyage estimates are based on a 35,000 DWT vessel, loading 33,000 tons of cargo, consuming around 32 mt of HFO, and 3 tpd MDO, plus allowances for heating and cleaning, the voyages reflect the bunker costs and freight rates at the time and assume 250TPH for palm, 300 TPH for UAN, 200 TPH for soft Oils and average rates for molasses. The average dedicated voyage earnings are compared to the average reported time charter equivalents of a vessel of 30/32,000 DWT in the Drewry chemical and product trade for a relatively simple and equivalent vessel of IMO 3 double hull capability. The highlighted results in yellow indicate that such a vessel could have made marginally more. In the past the oils and fats trade has swung with the CPP trade but with the expected pressure on oils and fats freight, and the difficulty of programming previous cargoes to enter the trade should it take off, more owners previously committed to the CPP trade with all its inherent volatility may now be prepared to switch a strategic number of their ships to the oils and fats trade. We are already aware of major traders and producers taking up dialogues with owners for longer term commitments, which is good news for the stability of the trade.

    20. Thanks you all for your attention, I hope you have enjoyed this presentation, in our view these developments give rise to great optimism for the future carriage of triacylglycerols so just make sure your vessels are minimum IMO 3 classed with double hull, and if they are stainless steel all the better .Thanks you all for your attention, I hope you have enjoyed this presentation, in our view these developments give rise to great optimism for the future carriage of triacylglycerols so just make sure your vessels are minimum IMO 3 classed with double hull, and if they are stainless steel all the better .