SSY Base Oil Shipping Report

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There are no major changes to be seen in the United States and European markets, with both needing a fresh injection of demand. However, Asia continues to make progress, albeit painfully slowly at times.

U.S. Gulf

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Demand is stifled on the route into Asia, with uncertainty over commodity prices in the wake of trade wars undermining owners efforts to fill their ships. There is still some prompt space around. Traders had toyed with sending styrene to Asia, but also have the possibility of sending it to Europe instead. Methanol and ethanol both feature among the list of fixtures last week, but in the parcels trade there is interest in shipping only phenol and glycols at present, neither of which are big volume cargoes and will not make much dent in the space that is currently available. Rates are still at rock-bottom levels of high $40s, low $50s per metric ton for 5,000-ton parcels from Houston to Korea.

Transatlantic demand is reasonably strong eastbound, in spite of reports to the contrary. Prompt space is pretty scarce to the extent that owners who do have prompt ships are looking to achieve higher rates, with high $40s and low $50s/t discussed for 5,000-ton parcels. Fixtures last week reveal more methanol being booked across to Europe, as well as cumene, vinyl acetate monomer, acrylonitrile, cyclohexane, mixed xylenes, paraxylene, caustic, ethylbenzene, urea ammonia nitrate and glycols.

Demand along the route into the Caribbean remains disappointing, and were it not for some fresh requirements of ethanol, caustic, styrene, gasoil and vegetable oil, there would be little to report on this market.

Ethanol is probably the main driver for freight on the southbound route into the east coast of South America. Sixteen thousand tons of ethanol from the U.S. Atlantic Coast to North Brazil was booked in the low $40s/t, which provides a marker for freight. Several further ethanol shipments were fixed out of Houston and the Mississippi, and there was more paraxylene done to Brazil. A fresh enquiry sees 3,500 tons of base oils looking for space from Houston to Brazil.

Europe

There is more cargo around on the North Sea and Baltic route than in the period immediately after the European Petrochemical Association event in Vienna, but it is barely sufficient to feed the list of hungry ships that are in the area, Owners have managed to find enough to do for one or two voyages, but not much beyond that. Biodiesel has been the savior for many, although it has been encouraging to see a number of base oil movements being booked in addition. One of the major issues has been the lack of rainfall in Europe, which has effectively reduced the amount of material that can be moved on several major waterways, including the Rhine. In many cases, product is stockpiled where it is not required, clogging up storage at one end of the chain, either at the sea-port, or at the inland-port, thereby strangling demand for further seaborne movements.

Southbound rates remain competitive into the Mediterranean. Six thousand tons of pyrolysis gasoline Dunkirk, France, to Priolo, Italy, was covered at just 30/t, for example. A couple of chemicals parcels have been quoted into Turkey, which represents a slight improvement in demand, but owners report that their usual volumes into Turkey are still far below what they would normally be carrying. Two thousand tons of base oils are still quoted from Rotterdam to Mohammedia, Morocco.

Northbound,owners have been keen to take any cargo out of the Mediterranean, leading to some aggressive offers. Two thousand six hundred tons of pyrolysis gasoline from the west coast of Italy to Antwerp-Rotterdam-Amsterdam was heard to have gone at around $185,000. Five thousand tons of alkylate from Augusta, Sicily, to Grangemouth, Scotland, was heard to have collected $205,000. FAME has been active, with more movements noted from Varna, Bulgaria, and Constanza, Romania, as well as from Huelva, Spain, and Valencia. Wax too saw a couple of fixtures from Augusta to Antwerp-Rotterdam-Amsterdam and Hamburg.

There have been many complaints about the poor demand within the Mediterranean, yet most owners have in fact been able to keep their ships going without too much idle time, but it has meant some ships have undertaken long, ballast legs in order to pick up the next cargo. Biodiesel has saved many blushes over the past week, and there have been a few base oil movements too into North Africa and Italy. Aromatics though are much quieter.

The westbound market is not exactly a hive of activity, yet determined owners who fully comprehend the situation along the transatlantic route have been able to drive through freight increases on certain bits of business. For the most part, demand comprises large cargoes of acid, biodiesel, urea ammonia nitrate and ETBE, though some wax and cyclohexane was seen quoted too. Five thousand tons of paraxylene from Rotterdam to the U.S. Atlantic Coast went in the $40s/t, up from the usual mid $30s/t.

Styrene possibilities have receded along the route into the Far East, leaving completion space still to fill on several vessels. Fifteen thousand tons of base oils fixed from the Black Sea to the Middle East Gulf and Singapore. Phenol and acetone remain unfixed, and there have been some small parcels of base oils to China and Singapore, as well as some methyl isobutyl ketone to China. Four thousand tons of ethylbenzene was attempted to Taiwan. Five thousand tons of mixed xylenes was quoted to China, and 7,900 tons of mixed grades were worked to multiple discharge ports.

There is still space around routes from Europe to India and the Middle East Gulf, but owners are attempting to maintain discipline and not let rates go down. Several base oil opportunities were noticed from the Baltic and Mediterranean, and there has been some styrene quoted to India.

Asia

Domestic demand slowly but inexorably continues to build within Asia. Intra-Northeast Asia is leading the way, with numerous requirements for aromatics in particular, including paraxylene, mixed xylenes, toluene, benzene, pyrolysis gasoline and styrene, augmented with smaller parcels of acetone, phenol, base oil, isopropanol and solvent naphtha C9. Rates show upwards potential, especially given the implementation of new rules on low sulphur bunker fuels in ports on the Yangtze River, China, which came into effect at the beginning of the month and which has added heavily to owners costs. Greater variety of demand has been seen on other routes within Asia, such as intra-Southeast Asia, and also northbound. Strong demand within the palm oil market to both China and India has seen freights increase, further limiting the amount of space available for base oils and chemicals.

A number of benzene requirements have surfaced on the transpacific eastbound export route, the rates for which are in the $50-54/t region for 6,000-ton parcels. There is not a great deal of choice for ships to Europe in the first half of November. Biofuels in one guise or another have been flooding the market, and charterers with 3,500 tons from China to Antwerp-Rotterdam-Amsterdam were being offered a few vessels at rates of $100/t or more. The dynamics from Southeast Asia are different and driven more by palm oil rates, and since these ships are not parcel tankers, owners tend to have a different evaluation as to what the remaining space is worth. For example, 6,900 tons of base oils from Singapore to Rotterdam were reportedly fixed in the low- to mid-$60s/t.

There is not a great deal of prompt space in the regional markets along the India and Middle East Gulf route, and rates are relatively firm. Eastbound contractual demand has been good, but spot demand is a not that busy, with just the usual aromatics from various ports in India and a couple of ports in the Middle East Gulf and Red Sea. Westbound is steady at the moment, and a couple of ships have bits of prompt space. There are possibilities however to complete from the Red Sea instead. Some large lots of methyl tertiary butyl ether and caustic have been quoted, and there has been the usual aromatics from India, as well as some ethanol from Karachi, Pakistan. Ten thousand tons of base oils were quoted to Turkey. Traders are trying to find ships for caustic from Iran to Turkey and Italy, but few owners will go to Iran and rates are in the $80s/t.

This report was originally featured in the Oct. 24 edition of Lube Report Americas.

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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