SSY Base Oil Shipping Report

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Space that is fully open or uncommitted in the U.S. Gulf in May is less common than before. Business in Europe has been slow, largely because of public holidays. Asia had a quiet week too.

U.S. Gulf of Mexico
The U.S. Gulf looks somewhat tighter for May. The reasons seem to be threefold. Firstly, contractual business has been a little busier, soaking up some of the spare capacity. Secondly, owners have opted to take whatever cargo was there, such as vegetable oils or tallow into the Caribbean or the Mediterranean, just to have their ships moving. And thirdly, there have been fewer ships fixed across from Europe, thereby minimising the number of competitors in the marketplace.

Rates have responded in some areas. Not so much in the Caribbean, as there are still some ships on berth with space, but more into Brazil and Argentina, where some rates have increased by $4 to $5 per ton.

U.S. Gulf-to-Antwerp-Rotterdam-Amsterdam has seen some stiffness on freights, but there are sufficient ships already on berth that most cargoes will end up being booked at similar levels to last week. Styrene is talked again for this route, but it is a stop-start affair that so far has not really materialised in any great volume.

U.S. Gulf-to-Asia has bottomed out, at least for now. June could see rates change direction again since it now appears that there will be a bunch of ships on berth with space. But until then, rates for 5,000 ton cargoes from Houston to principal Asian ports are edging closer towards $50/t. A 5,000 ton cargo from Houston to Mumbai, however, will probably end up costing between $85 and $90/t due to there being fewer candidates going that way.

Europe
Unsurprisingly, given that so many public holidays have occurred over the past ten days, the European market has been very quiet. Nevertheless, contractual volumes have been adequate, and there have been sufficient spot market requirements that the majority of vessels are covered in the very short term.

Where the interesting freights can be found are on those ships that have space to specific destinations. For base oil shippers, there are some opportunities on ships destined into Turkey from either the Western Mediterranean or Antwerp-Rotterdam-Amsterdam. Direct sailings from the Baltic have been limited this month. A 2,000 ton parcel from Antwerp-Rotterdam-Amsterdam to Istanbul tends to work out at around $75/t, with maybe a bit of a reduction if the ship still has space close to the sailing date.

Transatlantic activity has been slack for shippers of traditional commodities like aromatics and gasoline components, but fortunately for owners, base oils have been in demand with cargoes moving from both the Mediterranean and Northwest Europe. Rates are in the $50s/t for 3,000 to 4,000 ton cargoes from Antwerp-Rotterdam-Amsterdam to Houston, but closer to $70 to $80/t from the Mediterranean.

Europe-to-Asia is not that busy, and May space can still be found. Some owners contend that June contractual demand is strong, but so far there are still ships with space. A 5,000 ton cargo from Rotterdam to principal Far East ports should be workable for around $75/t, with increments payable for non-scheduled ports.

Asia
Coastal markets in Asia have been a bit more tranquil, with fewer aromatics enquiries quoted into China. Space has not begun to build up as it did in the summer of 2009, but there are certainly more ships open in the region, either fully or with part space than we have seen so far this year.

Palm oil trades went through a quiet spell over the past two months, with the main users in India and China tanked out with sufficient inventories. This is starting to unwind a bit and we have seen renewed interest in shipping into India and China. China especially is looking for alternative edible oils due to an ongoing trade dispute with Argentina that has ceased shipments of soya bean oil from Argentina (though not from Brazil).

Furthermore, Asian benzene prices are attractive to both European and U.S. buyers currently, and this is providing a certain amount of trade.

All the same, overall volumes in Asia seem lacklustre right now. India and the Middle East Gulf region are also a bit slower than normal and will probably be unable to help out with any surplus of tonnage in Asia.

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.

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