Continued demand growth in Southeast Asia is set to underpin product trade developments through to 2000, according to a report by British-based Ocean Shipping Consultants. The 187-page report, entitled Product Tanker Markets to 2005 , examines all areas of product tanker sector development over the next decade. It says that substantial near-term expansion in seaborne products trade is expected, lifting overall volumes by 21.8 per cent to 643 million tonnes. 'A more stable period is expected through to 2005, with overall trade volumes easing slightly by 0.6 per cent to 639 million tonnes,' it says. The study, which includes newbuildings, scrapping, employment patterns, trade volumes, operating costs, freight rates, newbuilding and second-hand prices, says Southeast Asian and Middle East developments will dominate developments in world refining capacity. Southeast Asian capacity has expanded by more than 60 per cent since 1980 and plans are for a further 20 per cent increase. Product tanker demand will be one of significant expansion, especially in the late 1990s, after which the average rate of employment growth is expected to be low. 'Vessel demand is set to grow at a faster rate than trade volumes - implying an increase in the relative significance of long-haul trades,' it says. Demand for larger vessels such as those over 40,000 deadweight tonnes (dwt), accounting for almost 48 per cent of all product tanker demand by 2005, will see a more marked growth. There will be continued expansion of the product tanker fleet, with the annual growth slowing down in the early parts of the next decade. 'Growth will be most notable in the 40,000-plus dwt classes, with overall expansion of approximately 39 per cent, as against the 13.5 per cent growth for the smaller vessel sectors,' the report says. There will be overall aggregate growth of about 48 per cent in average operating costs in the period to 2005. Newbuilding prices for product tankers will increase by under 30 per cent in the second half of the 1990s, with an almost equal price weakening over the subsequent half-decade. Freight rates are expected to rise in the late 1990s before weakening in the early part of the next decade. It predicts that while costs will continue to rise, there will be little expansion in freight rates and operating profitability will decline considerably. The report says that the key to future product tanker operating profitability will be in the mix of spot market/time charter cover and the timing of contract commitments, a trend that will dominate market operations for the remainder of the 1990s.