SSY Base Oil Shipping Report

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The U.S. Gulf is active, with vessel space in short supply. Europe is not as busy as before, while Asia is tailing off in advance of the Chinese New Year.

U.S. Gulf

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There are numerous cargo possibilities from the U.S. Gulf to the Far East, but business is being curtailed due to a shortage of vessels. Ethanol and styrene continue to lead the way, while more recently a number of very large methanol shipments have been quoted.

Further demand is provided by traders looking at phenol, glycols, ethylene dichloride and acrylonitrile. Some base oils have been attempted to Singapore with the charterer wisely accepting loading dates any time between now and March. Rates are firm, with 5,000-ton parcels from U.S. Gulf to China costing between $75 per metric ton and $80/t.

Transatlantic eastbound is another strong route where space is limited through much of February. Methanol, ethanol and styrene is also being encountered on this route, and further similarities with the U.S. Gulf-to-Far East route are provided by cargoes of ethylene dichloride, acrylonitrile, phenol and glycols, as well as parcels of cyclohexane, caustic, acetic acid and urea ammonia nitrate. Base oils are mostly restricted to contractual arrangements, although a parcel of nearly 4,000 tons was fixed in the mid $70s/t.

U.S. Gulf to India and Middle East Gulf is not blessed with a great deal of open space due to heavy contractual nominations for February. Base oil enquiries are temporising mostly, although 6,000 tons were fixed U.S. Gulf to Durban.

U.S. Gulf to Caribbean is reasonably tight on space suitable for parcels, but it should be possible to secure tonnage for bigger lots over 10,000 tons. Base oils have been fixed into Rio Haina for mid February, and there has been talk of small lots into Mexico and Colombia.

U.S. Gulf to the east coast of South America has seen freight rates creep up a little due to strong demand for space. Cargoes on 5,000 tons from the U.S. Gulf to Brazil are currently paying low to mid $60s/t, and some base oil shipments have taken place in the $70s/t.

Europe

In the North Sea and Baltic, it has not been an active week, and some vessel positions have not changed through the entire week. Base oils continue to move out of the Baltic on a fairly regular basis. Rates are starting to look a little softer.

Southbound markets into the Mediterranean have been fairly busy, yet in spite of this, freight levels on some regular cargoes have declined slightly. Biodiesel in the amount of 5,000 tons from Antwerp-Rotterdam-Amsterdam to West Mediterranean was heard to have gone at just 29/t, while 6,000 tons of paraxylene from Rotterdam to Iskenderun, Turkey, was settled in the very low $40s/t.

As with all routes, the lower numbers being seen have to be taken into context. Bunker prices are just $135/t-$140/t in Rotterdam, which is more than half of what they were just six months ago. This essentially means that in periods of low demand, such as now, owners can afford to be more competitive on freights yet can still earn as much as what they were doing back in July.

On northbound routes, vegetable oils have been pretty busy from the Black Sea to Antwerp-Rotterdam-Amsterdam, with at least six or so cargoes fixed in the region of mid $40s/t. Chemical demand has been rather soft, however, and rates have been weaker. Base oils also have seen lower rates, with 11,400 tons of base oils from Augusta to Rotterdam being worked in the mid to high $20s/t, for example.

Inter-Mediterranean business is strong, especially in the West Mediterranean where there has been a succession of biodiesel cargoes which have soaked up any available space. The East Mediterranean has not been as busy, and the clean petroleum market for instance has calmed down. Base oils have been active overall, with shipments within the West Mediterranean as well as some movements into Turkey.

Westbound transatlantic markets have been steady. There is not a great deal of prompt space remaining, and some scheduled owners reveal that they will not have much space until the end of February. Others, however, can still offer on February cargoes. Rates are around $40/t for 5,000-ton parcels from Rotterdam to Houston. Sulphuric acid, paraxylene, FAME and MTBE have been recorded moving. Some base oils have been booked too, with 1,850 tons paying mid $60s/t from Rotterdam to Houston.

Very little is looking to ship from Europe to the Far East these days and owners with February vessels are becoming very concerned. Traders have looked at parcels of orthoxylene, paraxylene, and mixed xylenes, as well as shipments of acetone, butanols and ethylene dichloride but very few of these have firmed up. Base oil interest seems non-existent at the moment.

Prompt space on routes to the India/Middle East Gulf region is scarce, which has caused the postponement of a number of requirements this week. No new base oil activity has been detected. Instead, there are cargoes of ethylene dichloride, linear alkyl benzene, butanols, acetone, styrene, orthoxylene and mixed xylenes. Phosphoric acid has been pretty regular these days, paying high $40s/t for big lots from Tunisia, while vegetable oils from the Black Sea have been going in the mid $50s/t.

Asia

The overall tone within Asia is one of gloom. Domestic demand has picked up briefly prior to the start of the Chinese New Year, but it is nowhere near sufficient to cover all the prompt ships that will probably end up with idle time over this next week or so.

Base oils are one of the more active commodities, with a number of prompt sailings required. Aromatics have been a little busier too on intra-Far East routes. Southbound is not busy but a number of charterers have noted that it has not been that easy to cover all their requirements, some of which are now being quoted for the second consecutive week. It is the same northbound. Certain cargoes remain unfixed, yet owners comment that there is not much business to be done. As usual, it is all about timing, location and the parcel size.

Asia export markets are very weak. Essentially, the region is overbooked, with too many inbound ships. Transpacific benzene demand has thinned though owners are still offering space for 5,000-ton cargoes from Korea to Houston in the $50s/t. There is a suggestion that 9,000-12,000 tons of benzene was fixed in the high $30s/t, although this is disputed and low $40s/t has also been claimed on this cargo. Base oils have been quoted to both the U.S. and to Europe. There is also space around to Europe and levels range from high $80s/t to high $90s/t, depending upon position.

Palm oil business may have picked up a little for later February shipments to India and China, but in the meantime there are still a number of potential carriers to both destinations, the rates for which are still low. Long-haul rates have continued to subside. A cargo of 11,500 tons of palm oils and palm fatty acids was booked from the Straits to Antwerp-Rotterdam-Amsterdam in the mid $50s/t, for example.

Regional trades in the India/Middle East Gulf arena are not that healthy. A few more requirements than last week have been noted, but voyages are relatively short and there is a large amount of available space in the area which is keeping rates suppressed.

Eastbound traffic is not great. Paraxylene, benzene, pyrolysis gasoline, ethanol and orthoxylene has been looking to move from India, but rates have fallen by a couple of dollars, while from the Middle East Gulf itself there is some MTBE, methanol, glycols and ethylene dichloride. Charterers are holding off in the expectation of securing even lower freight rates. Some base oils have been noted from the Middle East Gulf and Red Sea.

Westbound continues to experience weaker rates. Plant issues have also caused the cancellation of some MTBE bookings back to Europe. A couple of traders have begun marketing Iranian base oils directly into Europe following the relaxation of sanctions. The situation is still complex regarding insurance cover, but some insurers are believed to be offering cover in currencies other than the U.S. dollar.

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 London office SSYs Ian Roberts can be reached atfix@ssychems.comor +44 20 7977 7560 and in Singapore Jordi Maymi at +65 6854 7127.

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