Some regions have registered a slight increase in the amount of new business quoted. The drivers for the change appear to be a certain amount of stock replenishment after the Christmas and Asian Lunar holidays, and an ability to work the arbitrage.
The decision to idle a number of chemical plants over the past couple of months to allow demand to catch up finally appears to be paying off, with more of those plants beginning operations again, many of which are in Asia. However, if there is an uptick in the shipping market, it is just in its infancy since many ships across the globe remain without employment, and freight rates on the whole continue to be weak.
U.S. Gulf
Exports from the United States generally speaking are not that active, and it tends to be fairly easy to locate prompt space on the majority of tradelanes. Consequently, there is no real upwards pressure on freight rates. Perhaps the area that is seeing some growth in demand is on the U.S. Gulf to Asia leg, with several large cargoes of biodiesel and methanol being fixed. Styrene and benzene/toluene/xylene are also under discussion, as well as a host of smaller parcels. Contractual volumes seem to be picking up too. Nevertheless, we believe that rates for 5,000 ton cargoes from the U.S. Gulf to scheduled principal ports in the Far East still work out at around $40/t.
With eastbound Transatlantic still fairly slow, some of the vessels in that trade could switch onto other routes. That said, there has been talk of more styrene and biodiesel to Europe, which could have the effect of tightening the U.S. market. So far though, there is sufficient tonnage to go round, thereby allowing levels of sub $40/t to be achievable on 5,000 t lots for U.S. Gulf to Santos, and low $20s/t for the same volume to east coast Mexico.
Europe
Intra-European routes are fractionally busier, but there is no risk of the tonnage situation tightening dramatically unless demand really starts to motor. What we believe is happening is that spot market freights have become much lower than contractual rates, most of which were settled a year or two ago, and it is common to hear of spot freights that are at levels of between 20 to 30 percent lower than contractual rates. Consequently, some charterers, where possible, are placing cargoes on the spot market rather than under contracts, thus giving the impression of more activity, yet with still plenty of open space available.
Freight levels are roughly unchanged on most routes out of Europe. We would say that it is possible to fix 2,000 t cargo from Spain to Turkey at $40/t, and 2,000 tons from the Black Sea back to Spain at $50/t. A 5,000 to 6,000 t cargo West Mediterranean to Lagos currently attracts interest in the $60s/t, although we have heard that bigger volumes can fetch lower numbers in turn. For example, 5,000 t Baltic to U.S. Gulf would likely end up at around $60 to $65/t. Europe to Asia is seeing a growth in demand, but February also sees some interesting additional ships interested to go on berth. A 5,000 t cargo Antwerp-Rotterdam-Amsterdam to scheduled principal ports inChina would probably realize a rate of $70 to $75/t. The same cargo to India, via Suez, would go for around $60/t.
Asia
Business continues to build after the holidays, with more inter-regional trades detected, much of it being directed into China. Like all routes, there are plenty of open vessels, and freights show no signs of surging just yet. Exports to the U.S. and Europe are beginning to mount. Traders believe that benzene/toluene/xylene may work into the U.S. Gulf, while more sophisticated parcels of chemicals are being worked into the Mediterranean and Northwest Europe.
We have seen 10,000 t lots from Ulsan to the U.S. Gulf pay in the mid $70s/t. Freight for the same cargo to Rotterdam would probably now be in the high $70s/t, down marginally from last week. Freights to Europe are particularly sensitive to what is happening on the palm oil market, where 25,000 t from the MalaccaStraits to three discharge ports in the Mediterranean can apparently achieve rates in the mid $50s/t. The Middle East Gulf* to India region is another area where more activity has been seen. Numbers to India are probably unchanged, but rates are starting to inch upwards for longer-haul destinations.
Notes
Bunker prices have been steadily creeping upwards for the past month. The increase is not so great, but with freights already being trimmed to what ship owners deem to be rock bottom, any increase in operating expense becomes a greater burden and one which owners will be more inclined to pass on to the charterer.
*Middle East Gulf is the international shipping industrys preferred name for the body of water known both as the Persian Gulf and the Arab Gulf.
Adrian Brown is senior market analyst for chemicals and base oils with SSY Shipbrokers, London. Information about SSY can be found at http://www.ssyonline.com. Adrian Brown, in the U.K., can be reached directly at research@ssy.co.uk or by phone at +44 1207-507507. In the U.S., SSYs Steve Rosenthal can be reached at fix@ssychems.com or +1 203-961-1566.