SSY Base Oil Shipping Report

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Tightness of vessel space in the U.S. Gulf is the main limiting factor as to a lack of fixtures this week. Europe has been slightly busier on the long-haul routes but remains flat on coastal markets. Asia is slowing down in advance of the New Year holidays.

U.S. Gulf

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It has not been a particularly busy week along the Far East route. There are plenty of shipping inquiries, but too few ships and rates are therefore notional. Perhaps mid $80s per metric ton for 15,000-ton cargoes would entice some ships to ballast over from Europe, but another problem has arisen. There is a shortage of physical molecules to ship, with domestic demand cranking up for some grades such as styrene and ethylene dichloride. Aside from those products, there are possibilities to move methanol, ethanol, paraxylene, phenol, ethylbenzene, tallow and acrylonitrile.

Shortages of styrene are also affecting the eastbound transatlantic route, so even though there are inquiries to ship styrene into the Mediterranean and Continent, it may be that very little actually gets fixed. Rates are currently stable. A small parcel of base oils was quoted from Port Arthur to Antwerp-Rotterdam-Amsterdam, the first such requirement for some time. Parcels of cyclohexane, glycol, biodiesel, turpentine, lysine, cumene and palm oil have been noted.

Fog is affecting port operations in both Houston and Mexico, causing some contractual Caribbean-bound cargoes to spill over into the spot market. A number of chemicals and edible oil requirements have been seen both into and out of Venezuela this week, suggesting finance may be in place, which is contrary to some reports in the press. Base oils are still not active in the Caribbean area, and there has been no confirmation of the large base oil requirement being covered into Punta Cardon, Venezuela.

Prompt space is very tight into Brazil at present, yet there are a variety of caustic and ethanol orders to be performed. Owners who do have the possibility to ship ethanol are talking very high levels.

Base oils are still a very hot commodity on the India and the Middle East Gulf route. At least one cargo of 10,000 tons to 12,000 tons of base oils has been booked to India, with several more measuring 5,000 tons to 10,000 tons still seeking space. Ethylene dichloride and ethanol are also possibilities, as is acetic acid.

Europe

Base oils have been much busier within the North Sea and Baltic region, with spot fixing taking place both into and out of the Baltic, as well as along the North Sea coast. Occasionally, prompt space has been limited, and on such occasions freights suddenly jumped as owners realized there was no competition. For the most part, however, there are just about enough ships around to keep rates on a steady track.

Southbound demand has been reasonable over the past week, causing most scheduled ships to fill up. Furthermore, there have not been so many outsiders around, and those that have been in position have been able to take cargoes of styrene, caustic and biodiesel. Some attempts have been made to ship base oils to Italy, Turkey, Egypt, Israel and the Black Sea.

Rates northbound are fairly stable at the moment, with supply to demand for space well-matched. Aromatics seem to be the big thing on this route, with pyrolysis gasoline and benzene cargoes moving. Base oils have not really been in the equation this week, apart from 5,000 tons from Leixoes, Portugal, which fixed to Le Havre, France.

Base oils have had a good showing within the Mediterranean recently. Most have been in the direction of Turkey or North Africa, with nearly every Mediterranean refinery involved in the supply of cargoes. There have even been some shipments from the Black Sea. Scheduled base oil refinery turnarounds in the area may be partly responsible for the additional demand. The majority of freights have been at typical levels, although a couple of routine chemicals shipments were done at considerably higher numbers than usual.

As predicted, some prompt requirements struggled to secure space along the transatlantic route, and were booked at considerably higher levels than usual. For example, 5,000 tons paraxylene was fixed from Rotterdam to the U.S. Atlantic Coast at $40/t, compared to usual low $30s/t, and 7,000 tons to 10,000 tons of caustic from Antwerp-Rotterdam-Amsterdam to the U.S. Atlantic Coast fetched $43/t, while another 10,000 tons cargo of caustic obtained low $30s/t. Ten thousand tons of biodiesel from Hamburg, Germany, to New York was worked in the very high $20s/t. A cargo of base oils has been under discussion from Rotterdam to Houston, and a shipment of 4,000 tons of base oils was mentioned from the Mediterranean to Cuba. While staying with base oils, several cargoes were covered to Nigeria.

A number of base oil traders have been probing to see if there is any available space to Asia, but generally the prompt vessels are full. Owners have been successfully able to jack up rates for some of the small parcels. One thousand tons of chemicals from the West Mediterranean to Southeast Asia were heard to be fixed at $225/t. Most requirements are small and involve speciality products, such as acrylonitrile, methyl ethyl ketone, methylmethacrylate, phenol, leixoes, butanediol and diisodecyl phthalate.

Several base oil possibilities have been spotted this week to India and the Middle East Gulf, along with a sprinkling of small chemical parcels and a few slugs of mixed xylenes and acid. Several ships have been keen contenders, and rates have slipped in the face of competition.

Asia

There are very differing views about the intra-Far East market, with some asserting that space is very tight until the tail end of February, especially among the small ships that ply the routes, while others feel that there is more open space around, even prior to the New Year period. For the most part, it does seem that there is an ample number of larger vessels in position during the first half of February. Moreover, the amount of new business is dwindling, especially for loading this side of the New Year. A number of base oil opportunities exist, with some are proving stubbornly difficult to cover, such as 2,000 tons to 3,000 tons from Cilacap, Indonesia, to Port Klang, Malaysia, and Nantong, China, for early February.

Traders had been evaluating the possibility to ship benzene on the transpacific export route to the U.S., and it is believed that some may have succeeded. What was looking like a substantial overhang of space has thinned down to just a few pockets of space on a couple of carriers. The market to Europe, however, continues to see a selection of ships on berth. Some of the earlier ones appear to have fixed now, but there are more coming and not that many larger parcels. As always, small lots to outports still pay in the vicinity of $130/t, but larger cargoes such as 5,000 tons from Korea to Rotterdam may now command lower rates, such as high $70s to high $80s/t.

There is a substantial volume of trade being quoted in the regional markets into India and the Middle East Gulf this week. On the face of it, there are many ships around too, but the situation has been skewed by the severe congestion being encountered at certain ports in India, Pakistan and Middle East Gulf. Base oils are pretty lively again, with the most notable fixture being for almost 20,000 tons to ship from Al Ruwais, United Arab Emirates, to Mumbai in a single go. There is base oil moving from Iran and the U.A.E. into India as well, while another shipment of 9,500 tons of base oil is looking to go from Yanbual Bahr, Saudi Arabia, to Mumbai, with a freight target of $30/t.

Eastbound remains active, with the firmer requirements being snapped up first, and at relatively strong levels. Fifteen thousand tons of easy chemicals from the Middle East Gulf to Southeast Asia went in the low $30s/t, with another 10,000 tons achieving high $30s/t, for example. Some charterers, however, are holding out for lower levels, such as 5,000 tons of base oils from Mumbai to Jakarta, which are looking to achieve just $30/t. Westbound is unchanged. Demand is reasonable, and not so much prompt space exists to Europe, though several ships still have possible space to the U.S.

Adrian Brown is a senior market analyst for chemicals and base oils with SSY Shipbrokers, London, can be reached atfix@ssychems.comor +44 12 0750 7507. Information about SSY can be found atwww.ssyonline.com. In the Houston office,Steve Rosenthalof SSY’s Chemical Tanker Department can be reached directly at +1 (713) 652-2700 and Jordi Maymi in Singapore can be reached at +65 6854-7127.

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