SSY Base Oil Shipping Report


In the U.S. and Europe demand for space has waned, yet in spite of this, freight levels remain firm on the majority of routes. Asia however continues to record lower numbers across many domestic routes.

U.S. Gulf of Mexico
Only a handful of the fleet of ships still open in the U.S. Gulf in June have managed to fix away. Normally this would trigger a sharp drop in freight rates, but we notice that owners continue to quote the same levels as before. Where cargoes are fixed, the actual rate turns out to be at the old level with little decrease, if any, seen. Its a bit like the apple defying gravity.

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What we do see is that bunker prices also seem to be defying gravity, with 380 centiStoke fuel in Houston around $660/t, while WTI languishes around $100/bbl. There is little doubt that the disconnect between bunker prices and the price of crude oil is the main reason why freights have not gone down so far. Maybe if the lack of activity continues for a while longer then rates will perhaps cave in.

On the Gulf-to-Far East route there are signs that demand will stay poor, and even contractual volumes are slowing. Consequently, freights for 5,000 ton parcels from Houston to principal Far East ports remain in the upper $40s/t.

Eastbound transatlantic is also well stocked with vessel space, and demand is not as robust as before. Ethanol for example is less active due to a narrowing of the prices between Europe and the U.S. Nonetheless, 5,000 ton parcels from Houston to Antwerp-Rotterdam-Amsterdam continue to go for around $60/t.

On the Gulf-to-Caribbean route, we see contractual demand as strong, interspersed with a reasonable degree of spot market demand, keeping freight levels unchanged here. Gulf-to-east-coast South America is also pretty well balanced, and 5,000 ton cargoes from Houston to Santos work out around $75/t. As ethanol shipments to Brazil cease, and instead Brazil turns to exporting ethanol again, more space might open up southbound.

The mixture of public holiday and industry events that occur in June always seem to take their toll on business, and this year is no exception. The North Sea especially has been very slow both contractually and on the spot side of things, and there is a wide selection of available tonnage.

The Mediterranean too seems to have suffered a slowdown, yet in spite of this the freight numbers that are quoted and fixed are surprisingly high. Again, it is linked to bunker prices with owners objecting to any kind of ballast to pick up a cargo unless they are compensated.

Transatlantic activity is feeble with only occasional cargoes of paraxylene, pyrolysis gasoline and urea ammonia nitrate, yet freights have not dipped at all. Europe-to-Asia is however in jeopardy of decreases appearing within the next week or two. There are a handful of ships that are already on berth and need some completion cargo to fill, and it is here that levels may go down from their current mid-to-low $70s/t for 5,000 ton parcels from Rotterdam to main Far East ports. Deterioration in rates to India and the Middle East Gulf may occur for much the same reason.

Domestic Asian markets are quite gloomy, and the excess of shipping space is very noticeable on some of the coastal freights within the region. From Singapore to Ulsan, 3,000 ton parcels are currently running around $41 to $43/t, while the same parcel back to Singapore from Korea would cost about $33 to $35/t. A few parcels of toluene, styrene and mixed xylenes have been moving into China from Korea, but volumes are still much reduced from normal.

Export business is however buoyant with many small specialised parcels to Europe and the Mediterranean, as well as huge slugs of sulphuric acid to South America and a tentative benzene arbitrage to the U.S. We are also seeing more base oils being quoted out of China to a variety of destinations outside of Asia. Vessel space however is limited, and 3,000 to 4,000 ton parcels from Korea to Durban for example cost around $110/t, and the same parcel to Turkey is perhaps fractionally more expensive.

The mighty Middle East Gulf-India region is still strong, but perhaps not quite as strong as a fortnight ago. There are certainly more ships open in the region with space, and some of the cargo volumes have diminished. With this comes a slight reduction in freight levels, although only by $1 to $2/t to Europe, for example. And there are still owners who want $70/t to ship 1,500 ton parcels from the Middle East Gulf to the west coast of India.

Adrian Brown is senior market analyst for chemicals and base oils with SSY Shipbrokers, London. Information about SSY can be found at Adrian Brown, in the U.K., can be reached at or by phone at +44 1207-507507. In the London office SSYs Jordi Maymi can be reached at or +44 20 7977 7560.

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