Prompt space has tightened in the U.S. Gulf due to a slight upsurge in demand. Most European routes remain overtonnaged, and rates are under further downward pressure. Asia is the pick of the bunch and is the preferred location to keep ships.
U.S. Gulf of Mexico
There has been a bit of a run on July space from the U.S. Gulf. Transatlantic eastbound scooped up a number of ships, chiefly with styrene, the rates for which are in the mid $40s per ton for 5,000 ton lots out of Houston. Ethanol is again showing up on some routes, even into Brazil but also to Europe and to Asia. There is overcapacity of ethanol production in the United States right now, and there is a good chance we will see more of it on the shipping lists.
The U.S. Gulf-to-Caribbean is lacklustre with plenty of July space. Contractual demand is weak, hence the build-up of space. U.S. Gulf-to-Mexico has been weakening, but flooding on the Rio Grande River has obstructed overland transport which may trigger some seaborne freight.
U.S. Gulf-to-South Americas east coast has been fairly busy with caustic and some base oils, the rates for which are in the mid $60s/t for 4,000 ton lots.
U.S. Gulf-to-Asia saw a number of provisional last-minute fixings. Should all go through there will be little space left, but if they fail there will be sufficient space for the remaining requirements. Rates for 5,000 ton cargoes could be as low as $42/t, but could suddenly move up into the $50s/t for date-sensitive July liftings. At this stage, August looks to have plenty of space to Asia so rates would probably slip back again.
Europe
It has been another uncomfortable week for most ship owners who have ships trading around Europe these days. Some routes have perhaps seen a lessening of the really idle tonnage, such as in the Mediterranean. However, where one area becomes busier so another wanes. Southbound into the Mediterranean, for example, is not so hot, and rates are very competitive. Northbound saw more aromatics being fixed, especially from Italy, but levels have not been encouraging for ship owners.
The crackdown by the Turkish authorities on illegal base oil imports could have resulted in trade vanishing overnight, but we still see a number of shipments, presumably all from legitimate importers.
Inter-Mediterranean business overall looks to be a bit tighter, with a fair number of ships already booked into August. Rates are basically unchanged however.
Transatlantic westbound is not that busy, most cargoes being larger lots of naphtha and gasoline-blending components interspersed with the occasional chemical parcel. Numbers are stable in the high $20s/t for 5,000 ton lots from Antwerp-Rotterdam-Amsterdam to the U.S. Atlantic coast.
Europe-to-Asia is featureless with hardly any demand for space, yet with plenty of July and August vessels. Rates for 5,000 ton cargoes from Antwerp-Rotterdam-Amsterdam to principal Far East ports have dropped into the upper $60s/t. Freights from Antwerp-Rotterdam-Amsterdam to the west coast of India are roughly similar, but we see hardly any base oils among the enquiries.
Asia
Whilst not a hive of activity, at least having a ship in Asia gives a slightly better result than trading it in the other major regions. Domestic trades are seeing a very marginal increase in demand, significantly into China, with styrene, MTBE and aromatics among the main products moving.
Exports from Asia are pretty robust too, meaning that there are few totally idle ships with absolutely nothing to do. Furthermore, palm oils are always an alternative for ships with suitable last-cargoes.
Rates for 10,000 ton cargoes from the Malacca Straits to the Black Sea are in the high $60s to low $70s/t, with mid-to-high $70s/t applicable for West Africa. A 10,000 ton lot to the west coast of India pays $25 to 26/t, which works out as a good positioning voyage, as there are many cargoes being sourced out of the Middle East Gulf and India these days.
However, being associated with shipments into or out of Iran has become increasingly risky since 1st July following the ratification by President Obama of the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010. Designed to reinforce UN sanctions on Iran by criminalising those who continue to trade with Iran, it could impact the shipping community, particularly those with U.S. connections. Ultimately, there may be greater reluctance to send ships to Iran which would mean the ships having to forage for cargoes elsewhere.
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.