SSY Base Oil Shipping Report

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U.S. markets are more dynamic this week, especially the routes into the East. Europe has hit a slow patch, but Asia is avoiding the summer doldrums so far.

U.S. Gulf
The last couple of days have seen freights rise considerably on the U.S. Gulf to Far East route as demand for space has finally overtaken the supply of ships. This situation has been brewing for several weeks but every time it came close to happening, something occurred on product pricing or availability which caused charterers to back off and subsequently, owners to become nervous, ultimately forcing rates to fall back down.

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However now there is enough demand from both spot and contractual markets that almost every ship for August is full. Those that do have space have restricted themselves on the types of cargoes they will carry or else will serve specific destinations only.

The majority of requirements are for styrene, aromatics, glycols or ethylene dichloride, but there are some base oils interspersed among them. Rates were being done on the low $60s per ton for 10,000 ton parcels of easy chemicals from Houston to Mainport Far East, but the most recent fixtures are mentioned in the low-mid $80s/t for this kind of volume. Base oils to China could easily hit triple digits.

U.S. Gulf to India-Middle East Gulf is experiencing good demand among the solvents, ethanol, vegetable oil and ethylene dichloride and with relatively little space left the base oil enquiries that are out there could see numbers jump well into the $90s/t for 5,000 ton parcels.

Transatlantic eastbound is quite tight on prompt space among the scheduled carriers and because those ships that are fully open in the U.S. Gulf in August with no forward programme are being drawn onto the routes to Asia it makes it harder to keep transatlantic rates in check.

Some slight strengthening of levels has already started and we see levels for 3,000 ton parcels from Houston to Rotterdam being in the low-mid $50s/t for example, rather than in the upper $40s/t.

U.S. Gulf to Caribbean is certainly tighter on prompt space while the route southbound in South America throws up little space until second half of August. Numbers for small lots of base oils will be into the $80s and $90s/t for 3,000-4,000 ton parcels.

Europe
The summer holiday season has been biting into the coastal markets in Europe.

The North Sea and Baltic areas are especially slow with plenty of prompt open ships around. Owners have been showing aggressive rates for cargoes that really suit their ships.

Southbound into the Mediterranean has perhaps been one of the busier routes with steady volumes of caustic, ethylene dichloride, biodiesel, ethanol, ETBE, MTBE and vegetable oil cargoes quoted, as well as a few base oil opportunities.

Inter-Mediterranean business too is keeping up a steady demand for space and most ships have built up a buffer of forward employment of a week or so. All the same, owners are keen to preserve that buffer and this means that rates can still be quite competitive, especially as August tends to be the quieter of the summer months in the Mediterranean.

Northbound demand is paltry and freights can be very keen, especially out of the eastern Mediterranean to northwestern Europe. A parcel of 3000 tons of base oils from Greece to Antwerp-Rotterdam-Amsterdam could attain a level of around $50/t, for example.

Transatlantic westbound saw a spate of gasoline component cargoes fixed about a week back, but then things have cooled off this week and several owners have become edgy about filling their ships which is causing freights to remain soft in the low $40s/t for 5,000 ton parcels from Rotterdam to Houston.

Europe to Asia sees several vessels vying for cargo off first half August dates from Rotterdam. Owners are looking to achieve rates in the mid-high $80s/t on average for 5,000 ton parcels from Rotterdam to Mainport Far East. The amount of business quoted however is rather thin and unless more cargoes appear this week those freight levels could come under downwards pressure.

Base oils have been moving to Asia but evidently supplies of the desired heavier grades are becoming harder to locate which could entail restricted Mediterranean ports which then favour smaller vessels and premiums over the rates from Rotterdam.

Europe to India-Middle East Gulf also sees a few more base oil requirements, mostly from the Mediterranean and Black Sea, while scheduled space is not so plentiful. A cargo of 3,000 tons of base oils from the west coast of Italy to Jebel Ali could be expected to fetch around $100/t for example.

Asia
The past week has seen rather more enquiries into China, particularly for aromatics, styrene and glycols, most of which will be shipped on the intra-Far East route, although some fresh enquiries have popped up for loading from Singapore and Southeast Asia too.

Base oils are moving from Southeast Asia into China too. Rates have hardly changed over the past week or two. On the whole, vessels are fixed past the first 10 days of August, but there are still a number of prompt units that require positioning cargoes and in such instances freights may be more competitive than normal.

The route from Asia into India and the Middle East Gulf is however seeing a rise in demand for a wide array of chemicals and this is causing freights to stiffen slightly. Base oils have not really been part of the cargo mix, possibly because of greater competition from Iranian base oil suppliers who are looking to ship more material to India instead of and partly because of East European base oils moving into the United Arab Emirates.

Asia Export demand is not so active right now and a few more ships are interested in cargoes to the U.S. or Europe. Traders however warn that benzene demand is picking up from the U.S. and may snare some of the U.S.-bound tonnage but that there are opportunities to Europe in August. A 3,000 ton base oil cargo from Korea to Turkey for example could be expected to fetch around $130/t.

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

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