The U.S. market has taken a step back in advance of Thanksgiving. Europe is trying to develop more demand but has not been entirely successful, while Asian activity has not progressed much either.
U.S. Gulf
It has been a little disappointing out of the U.S. Gulf over the past week. There just does not seem to have been anyone who pulled the trigger to initiate the usual melee that takes place in the final weeks of the year.
On the U.S. Gulf to Far East route, non-scheduled ships are milling around, poised to go on berth in December, but until the charterers really work out how much more material they need to shift before year-end, the owners have to show restraint and hold back. This in turn causes a little discomfort since many brokers interpret that critical mass of unfixed tonnage as a potential pool of cheaper ships, or ones that could potentially lower freight rates.
So on one hand there are ship owners seeking to increase freight levels into the high $90s/t for 5,000 ton parcels from the U.S. Gulf to Mainport Far East routes because they are fairly confident that an end of year rush is still probable, while at the same time there are brokers who are reporting back to their clients that the market is in the low-mid $80s/t. Meanwhile, the real fixing is done in the low $90s/t. It is very likely that little action will occur prior to Thanksgiving, which means that come the first week of December there will have to be some hard decisions taken. And it will all boil down to whether there is a final push to get rid of material before the end of the year.
Rates on the U.S. Gulf to India-Middle East Gulf route remain unchanged. November space filled out long ago but as yet there have been no moves to put additional vessels on berth against some of the potential base oil, vegetable oil and chemicals possibilities that have been quoted. Rates have dropped slightly on the transatlantic eastbound service, taking rates for 5,000 ton parcels from Houston to Rotterdam into the low $50s/t and potentially even lower than that. Nothing much is showing apart from a bit of styrene and ethanol.
Freights on the U.S. Gulf-to-east coast South America market are also being dragged down by the potential surplus in the U.S. Gulf, and we have seen levels in the mid $70s/t discussed for 5,000 ton parcels from Houston to north Brazil. Some base oils have been spotted, but as part of a bigger package of chemicals to try to minimize the freight. U.S. Gulf-to-Caribbean remains firm so far, with hardly any open space this month.
Europe
Activity has been reasonably healthy in the North Sea and Baltic, and the majority of ships have a cushion of at least a few days employment in hand. Rates are deemed to be less firm, however.
Southbound into the Mediterranean has been busy and has produced some very strong freight levels. For example, 5,000 tons of easy chemicals from Rotterdam to Tarragona fixed at around 34/t, and was mimicked by several other fixtures into southern Spain at similar levels.
Curiously, rates into the east Mediterranean are lower, and it is possible to find tonnage for 1,500 to 2,000 ton parcels into the Sea of Marmara at $70-$75/t. Base oils have been attempted from the Baltic to Turkey, despite the changes in regulations in Turkey. A shipment of 12,000 tons of vegetable oil from Kaliningrad to Algeria paid low $40s/t, and it should be possible to find a ship into Turkey for high $40s/t or low $50s/t for a similar size cargo of base oils.
Northbound is steady. Inter-Mediterranean markets are reasonably busy. It can be quite tricky at times securing ships in the west Mediterranean with the right credentials to suit the main producers in the region. Freights are up by a dollar or so but nothing insurmountable. Base oil demand is a bit subdued, with only a small amount of demand into Turkey.
Transatlantic westbound generated a bit more demand for products such as pyrolysis gasoline, cumene, cyclohexane, paraxylene, toluene and benzene, but the arbitrage is quite narrow and freights have to be lower than the $40/t or so that owners want for 5,000 ton parcels from Rotterdam to Houston.
Space is tight from Europe to Far East through to the end of December, and a charterer would be hard-pressed to find space from Rotterdam for even just a 5,000 ton parcel. Outsiders can easily be found but are not cheap. For example, 15,000 tons of paraxylene from Rotterdam to China ended up paying close to $100/t.
Europe to India-Middle East Gulf is busy with larger lots of phosphoric acid and vegetable oil, the rates for which are fairly hefty and influencing the rates for base oils.
Asia
The domestic Asia market is rumbling along, making an occasional loud bang but not shaking the ground. There have been a steady flow of cargoes into China, mostly of aromatics but base oils have been well represented too. Almost all the late November ships have been mopped up, and much of the demand has shifted to December dates. But its still not the year-end frenzy that has been seen in previous years and rates are actually fairly static.
Rates on Asia export markets have stabilized, and in some cases we have even seen increases. Arbitrages opened for benzene to ship to the U.S., but closed almost as quickly. Some small parcels from China to Mediterranean were fixed at close to $150/t for example, when the previous fixture had been confirmed at below $140/t. It seems to be linked to a shortage of prompt space that has caused a spike in palm oil freights, which is contrary to what was expected to happen.
There have been end of November fixtures to west coast India where the rates for 13,000 ton cargoes have been in the mid $40s/t instead of the usual low-mid $30s/t, primarily through a shortage of space. The India-Middle East Gulf region has been hot this week with some strong rates seen. For example, 6,000 tons of base oil from Middle East Gulf to west coast India cost around $40/t. Another intra-Middle East Gulf movement of 3,000 tons of chemicals fetched $215,000.
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
