SSY Base Oil Shipping Report

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It has been another shockingly quiet week in most areas of the world. Many were surprised by the United Kingdoms vote to leave the European Union, and the resulting uncertainty has unsettled most markets.

U.S. Gulf

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The last bits of June space to the Far East finally filled, but there is still quite a bit of July space outstanding, and the market has not been that busy over the past week. However, the very latest news is that following the Brexit vote, styrene prices have risen quite considerably in Asia, opening a wide arbitrage for U.S. product, which might be the salvation that the owners need. Beyond styrene, there is still some ethanol around, as well as some glycols, phenol and acrylonitrile. Base oils did not make the list again this week.

Scheduled owners are taking a fairly relaxed view of the transatlantic eastbound route, benefiting from strong contractual demand. Spot rates have fallen over the past month, but now appear to have stabilized. It is a different scenario, though, for those owners who inserted tonnage on berth to take advantage of some of the spot requirements such as acetic acid, cumene or caustic, as they have struggled to fill their ships and now have open space.

Base oils are moving to Europe as part of internal company transfers, with 3,000 tons fixed from Houston to Rotterdam in the high $60s per metric ton, for example. Base oils in the amount of 12,000 tons are also believed to have been fixed from the U.S. to Lagos, Nigeria, for around $900,000.

As expected, all the ethanol so far in the direction of the Middle East Gulf and India has been booked out of Brazil. That just leaves some ethylene dichloride being discussed from the U.S. Gulf, since base oils are not in contention these days.

Activity to the Caribbean has been muted over the past week. There have been requirements for orthoxylene, toluene, methanol, caustic and vegetable oil, but nothing particularly meaty, and certainly little to note in terms of base oil.

Ethanol continues to be fixed from the U.S. Gulf to Brazil with further cargoes pending. Caustic, acetone and paraxylene are contributing to the flow of material, but things have eased off again this week, in common with all routes.

Europe

The North Sea and Baltic region has produced mixed results. Some owners have ships that need to be filled right now, whereas several others are almost full for the rest of July. Some contracts are clearly performing better than others. In terms of spot activity, it has not been particularly lively, although base oils have had a good run of fixtures again from the Baltic, and this time to European destinations as well as for eventual deep-sea shipment.

It has been hard for owners to fill all their last June space on southbound routes. In some cases, owners resorted to taking large cargoes of caustic, MTBE, alkylate and styrene. A styrene load of 5,000 tons was booked into Turkey in the mid to high $40s/t. There are also claims that another 5,000 tons of styrene was fixed to Egypt at $42/t, although this has been disputed and is claimed to have gone at close to $50/t. All the same, these levels are highly competitive.

There is some base oils business being quoted into both Egypt and Turkey, and it will be interesting to hear what this fetches in the end.

There is a lot of tonnage around, competing for the same bits of northbound business, and this is keeping rate levels pretty low. Base oils have not been that active this week, with just 7,000 tons fixed out of Augusta, Sicily. Talk of a shipment from Kavkaz, Russia, to Antwerp-Rotterdam-Amsterdam has perhaps been covered out of the Baltic instead.

Following the resumption of work at the French refineries, there has been a bit more inter-Mediterranean business in the West Mediterranean, with cargoes of MTBE, FAME and benzene moving around. Ramadan has, however, meant a slower period in Turkey and North Africa. The vegetable oil side of things has been busy in the Black Sea and locating quality tonnage in the Black Sea has been tricky, which is perhaps why 5,000 tons of FAME from the Black Sea to Fos, France, had to pay around $50/t.

It is a messy picture westbound. Several prompt ships face the prospect of sailing to the U.S. with open space because there is insufficient cargo for them all. Rates are mostly weak – 5,000 tons of paraxylene from Rotterdam to the east coast of Mexico paid just $34/t, for example, whereas 5,000 tons of paraxylene from Kotka, Finland, cost $69/t to the U.S. Atlantic Coast. A couple of 2,000- to 3,000-ton parcels of solvents from Rotterdam to Houston were booked for just over $50/t, one for the first half of July and the other for the second half of July.

Base oil activity is minimal, although there is a new tender to Punta Cardon, Venezuela, that could see some base oils exported from Europe.

The market to the Far East remains very quiet, with another week of almost zero activity. All the main carriers have July space and are really wondering how to fill out. A base oil cargo of 5,000 tons was quoted from Antwerp-Rotterdam-Amsterdam to Singapore for July and will probably be hotly contested by the owners.

Rates to the India/Middle East Gulf region continue to weaken due to the oversupply of tonnage in the region. Easy chemicals in the amount of 10,000 tons from Antwerp-Rotterdam-Amsterdam to the west coast of India elicited rates as low as $63/t, some $10/t down from a month or so ago. Further concern has been raised at the inability of phosphoric acid sellers and buyers to come to terms over second-quarter pricing, and sellers are threatening to not permit any further new sales after July 1 unless a price is agreed upon. Vegetable oils and base oils continue to provide the excitement this week.

Asia

There is a lot of emotive talk about domestic Asia business. The facts would suggest that there are indeed ships that are fully open in prompt positions, but equally there are ships that are fixed forward by 10-20 days, which is a fairly normal situation in most markets. There is clearly a lot of fixing taking place under the radar, which has the effect of keeping rate levels on a soft footing. Base oils are moving in fairly standard volumes, but cargoes of aromatics seem to be fewer in number.

The southbound route is judged to be highly competitive these days, with very little cargo to help the ships back to their usual loading areas. Several caustic requirements have been noted, as well as some motor gasoline (mogas) into Singapore, but apart from some small parcels of solvents into Thailand, there does not seem to be much else around right now.

In northbound trade, the additional requirements of pyrolysis gasoline, base oils, methanol, MTBE, toluene and paraxylene that have been quoted over the past fortnight has certainly helped clear out many of the prompt ships on this route. Contractual volumes are also reported to be strong, which means that most ships have dropped into mid to late July positions.

It would seem there is quite a lot of open tonnage available for prompt loading for destinations within Southeast Asia. With the palm oil markets remaining flat, there is likely to be a lot of interest from all sides on any cargo that is quoted in the market. An announcement from the Indonesian authorities today that export duty on palm oil will be reduced to zero in July might provide some stimulus for trade, but in reality it is unlikely to change the bigger picture.

There has been further talk about exporting paraxylene and benzene to the U.S., which has helped some owners reduce the amount of tonnage they have open in the area. All the same, all the scheduled owners still have July space and rates remain flat. There is space available to Europe from Korea in the first half of July, but virtually nothing for the second half of July. Rates into the outports in the Mediterranean remain high.

In the India/Middle East Gulf region, some owners report pretty solid contractual nominations for July, but the spot element in the market is very poor and rates continue to decline throughout the region. A cargo of base oils has been noted out of the Red Sea and some small lots have been shipped out of Karachi, Pakistan, as well as the United Arab Emirates.

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 12 0750 7507.In the Houston office,Panos Giannoulis of SSY’s Chemical Tanker Department can be reached directly atpanos@ssychems.comor +1 (713) 652-270and in Singapore Jordi Maymi at +65 6854 7127.

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