The firmness in freights to Asia has to be contrasted with the softness in rates back out of Asia. Inbound Asian rates appear to have peaked, and whilst outbound Asian rates have lost some $10 per ton this week, we would hesitate to say that those rates will not fall further.
Some may suggest that rising bunker costs preclude any further deterioration in rates, and indeed, we have seen some owners decide to send their ships in ballast to Europe from Asia, but we suspect some contribution to cover costs will always be welcome. All other global routes had a miserable week, either recording lower levels than the previous week, or at best holding on to the same rates.
U.S. Gulf of Mexico
Space remains tight in the United States, but the only route on which vessel space is stretched really thinly is on the route to Asia. Otherwise, key routes such as from the U.S. Gulf to the Caribbean and from the U.S. Gulf to Brazil all have open space during May.
A 3,000 ton base oil cargo from the U.S. Gulf to Brazil would cost around $55 to $60/t currently.
Eastbound transatlantic is quieter since styrene is no longer moving to Europe, and freights are off by a dollar or so.
Since space is so tight in May to Asia, expect to pay $100 to $120/t for 3,000 t of base oils from Houston to main Asian ports, and more for unscheduled ports. Freights on the U.S. Gulf-to-India service are firm, and we see levels of $90 to $95/t for 4,000 to 5,000 t cargoes from the U.S. Gulf to the west coast of India.
Europe
Conditions for running vessels on the intra-Europe services are harsh. A large number of ships have limited forwards employment, and with contractual business remaining poor the prospects are not favourable.
Rates into the Mediterranean are highly competitive, and we would expect 3,000 t of base oils from Antwerp-Rotterdam-Amsterdam to Turkey to cost around $50 to $55/t, and $30 to $32/t from the Western Mediterranean to Turkey.
Vegetable oils from the Black Sea are less active, with both letters of credit and export licences taking longer to secure, which may cause owners to seek alternative cargoes from the Black Sea.
Transatlantic is flat. From Antwerp-Rotterdam-Amsterdam to the U.S. Gulf, 5,000 t cargoes are worth around $38/t, but small parcels can be expensive, easily costing $75 to $100/t, depending upon the cargo complexity and the ports involved.
Space to Asia remains very scarce for the first half of May, but there are still ships that can offer on end May cargoes. Rates are so far holding at around $90/t for 5,000 t cargoes from Antwerp-Rotterdam-Amsterdam to main ports, since there is still strong interest in shipping many different chemical commodities as well as base oils. Some owners would like to see a further increase in freight in order to compensate for the drop in backhaul rates out from Asia, but it is too early yet to see whether such a move will be successful.
Levels into India are steady at around $67 to $68/t, but demand is firm and freight may edge up slightly. There are a number of pyrolysis gasoline cargoes looking to ship from the Mediterranean and Black Sea to the United Arab Emirates, and there may be completion space available once these cargoes are fixed, in which case 3,000 t of base oils from the Black Sea to the west coast of India could achieve levels of $60 to $70/t.
Asia
There are so many vessels coming open in Asia that rates have inevitably dropped. Palm oil freights set the benchmark for shipping chemicals and base oils, with 15,000 t of palm oil from the Malacca Straits to the Mediterranean now commanding the mid-$30s/t, effectively a drop of some $10/t over the course of the week.
Freights from northeast Asia are declining too, and we would expect to see numbers around $65/t for 5,000 t of base oils from Ulsan to the Mediterranean, and about the same figures to Antwerp-Rotterdam-Amsterdam. Palm oil rates to India have collapsed in spite of fairly strong demand, partly because ship owners can use them to position their vessels into a more potentially rewarding region.
Any size cargo from 4,000 t to 12,000 t from the Malacca Straits to the west coast of India presently pays in the low $20s/t. A base oils cargo from Southeast Asia to the west coast of India would command slightly more, but certainly below $30/t.
Inter-Asia chemical business is still fairly active in the smaller sizes, with no major changes in rate to report. Trade from the Middle East Gulf and India is steady, but unexciting. There are rather a lot of open positions in the area after discharging chemicals or acids, and we detect a weakening in freight, especially westbound. A 5,000 t base oils shipment from the west coast of India to the Eastern Mediterranean could easily attract levels of $50 to $55/t.
Notes
It has been a busy week off the coasts of Somalia and Yemen. Several more vessels have been captured by pirates, but intervention by armed security guards on a cruise ship saved the vessel from being boarded by pirates. In another incident, Yemeni armed forces rescued a Yemeni vessel and crew that had been captured earlier, killing a number of the pirates involved.
The Piracy Reporting Centre of the International Maritime Bureau (IMB) is often quoted as a source for information regarding attacks by pirates. A recent report of theirs suggests that there have been 61 reported attacks in the area in the first quarter of 2009. However, we have been advised by the military commanders of the naval coalition forces in the area to treat some of their reports with caution, in particular those that refer to numbers of attacks. The Piracy Centre is funded by voluntary contributions from the shipping and insurance industries.
Adrian Brown is senior market analyst for chemicals and base oils with SSY Shipbrokers, London. Information about SSY can be found at 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.