SSY Base Oil Shipping Report

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European coastal routes are not quite as busy as before, whereas deep-sea routes remain strong. U.S. and Asian markets are pretty much unchanged in terms of activity, and freight levels are unaltered.

U.S. Gulf

The U.S. Gulf-to-Far East route has been much busier, with at least 50,000 metric tons of styrene fixed and a further 20,000 tons or so still pending. In addition, there have been some sizeable chunks of base oils discussed, as well as ethanol, phenol, acrylonitrile, and glycols.

Space is becoming very tight for the first half of February loading, but strangely, the owners who have space remaining continue to quote levels of $56-58/per ton for 5,000-ton parcels to Korea or Taiwan. However, as space tightens we expect these levels to go the other side of $60/t, and quite quickly too.

U.S. Gulf-to-India-Middle East Gulf is another route on which base oils are being discussed, but are more modest volumes and not the 10,000-15,000-ton parcels that were done in January. There is some outsider space available still for mid-February loading and levels for 5,000-ton parcels of no-heat base oils could potentially go for $80-82/t.

Transatlantic eastbound has seen interest in shipping base oils to Europe. Styrene too is a possibility on this route, as is phenol, acrylonitrile and vinyl acetate monomer. Freight levels are practically unchanged from the past couple of weeks. There are several 20,000 dwt ships that are at a bit of a loose end in the U.S. Gulf in February, and depending on what they do and where they go there is a good chance that their owners will require some completion cargoes which could be offered at levels that are more attractive than normal scheduled carriers.

U.S. Gulf-to-the east coast of South Americais heavily focused on contractual deliveries, leaving minimal amounts of space for spot business. There is a certain familiarity about spot cargoes too, consisting mainly of caustic, acetone, ethanol and some small drops of base oil. Rates are generally stable.

U.S. Gulf-to-Caribbean continues to see some interest in base oils into Colombia and Dominican Republic. The choice of tonnage for Colombia is slimmer following some changes in contractual partners and to which ships now go there regularly.

Europe

Cargo volumes in the North Sea and Baltic have declined over the past week, although it has not had an appreciable impact on freight rates as it would appear there is still a heavy demand for contractual tonnage. Clean petroleum markets are also fairly strong with colder weather causing a draw on stocks. Base oils are still discussed from the Baltic but increasingly more for deep-sea destinations than simple deliveries to customers in the United Kingdom and northwest Europe.

Southbound remains fairly busy and freights are robust. There are several ships which still have part-cargo space available but the range of commodities available to ship will probably mean few opportunities for discounting.

Northbound from the Mediterranean is also quite busy and several routine cargoes have been faced with freights that are much higher than normal.

Inter-Mediterranean markets feel quieter until you start tracking down prompt space when it becomes noticeable that the majority of ships are actually employed. Some bad weather is being reported in the west Mediterranean with strong winds, and gales are forecast for the usual Black Sea ports where base oils are loaded. However, the risk of ice in these ports has diminished with some shipping agents suggesting there is unlikely to be any ice at all this month.

Transatlantic westbound has been busy. Benzene has begun to appear as traders test rates. Paraxylene to Charleston, Cooper River and Montreal are also possibilities, as is cumene and toluene. Several large cargoes of sulphuric acid have been covered and urea ammonia nitrate is still very much in demand. Base oils have been targeted by traders, with bright stock mentioned in particular. Rates are steady at the moment but could have some upside potential if the benzene cargoes start to firm up.

Europe-to-Far East is becoming tight on space as fresh enquiries emerge. Styrene is still possible, as is acetone, ethylene dichloride and some base oils. Rates are being reported in the low-to-mid $90s/t now for 5,000-ton parcels to China, though some owners are happily quoting higher levels.

Europe-to-India- Middle East Gulf has seen several small ships fix as space becomes scarce on scheduled carriers. Most of these ships are taking small parcels of aromatics or hexane, as well as some ethanol. There are some recent requirements of base oils mentioned in this direction. Rates are therefore in the $90s/t for small parcels from the Mediterranean and perhaps $80s/t from Antwerp-Rotterdam-Amsterdam, subject to space availability.

Asia

Demand for chemical cargoes seems to be rather limp on the domestic Asia market these days, with the only real activity taking place on the intra-Far East route with shipments being shuttled into China from Korea. Base oils are perhaps one of the busier commodities, especially from Korea, although a number of requirements seem to be very similar and may just be price checking by the buyers.

Space on the Intra-Far East route is rather tight, but it is not impossible to collect a variety of offers from ships still with space over the next 10 days.

The other routes in the area, such as southbound to Southeast Asia, are slow and freight rates are coming down.

Northbound is also sluggish and rates are weak. Asia export markets are not as active, especially to Europe. Benzene has been booked to the U.S., but rates are now back down to around $60/t for 6,000-ton parcels from Korea. There is still open space within February in most directions.

Palm oil demand is really poor in India and rates have slipped into the upper $20s/t, even for west coast India destinations, causing some owners to avoid the trade altogether, but all that does is create an even greater overhang of tonnage in Southeast Asia.

This week saw rather more business develop in the Middle East Gulf- India region, especially in the local trades in and around the Middle East Gulf and India.

Eastbound has seen a reasonable amount of cargo quoted, totalling something like 100,000 tons according to SSYs records, but some of this business is tentative, such as benzene and paraxylene out of India and there is a certain amount of duplication. Space can be found fairly easily, and rates are soft.

Westbound does have some smaller vessels chasing cargoes, but in general this route is stable.

Adrian Brown is a 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 Panos Giannoulis can be reached atfix@ssychems.comor +44 20 7977 7538 and in Singapore Jordi Maymi at +65 6854 7127.

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