Ironically, the market that has seen the sharpest fall in freight rates is possibly the one with the most potential business. Almost as if in a game of poker, charterers into the Far East have been able to bluff owners into thinking that rates must be lower to compete, and it really only takes one or two nervous owners to accept charterers terms and then, suddenly, the whole core of the market is undermined. This is what has occurred. Now the benchmark figure for 5,000-ton parcels from Houston, U.S. to Mainport, Far East is $45 per metric ton. Even this level is under pressure from charterers who want to achieve further cuts to freights, and since there are some six to seven ships with part-cargo space on berth to Asia, and with another four to five potential candidates available, it really is hard to see owners being able to reassert their freight levels. Styrene is the major product in contention, but there are shipments of phenol, ethylene dichloride, ethanol and cumene still to be booked. Base oils are still in tight supply and are not really moving on the spot.

The Transatlantic route has potential demand, but again, traders are trying hard to squeeze freights down further. There are not so many owners with space, however, and, while one or two may accept a rate in the $30s/t, the majority of fixtures are being accomplished in the mid $40s/t basis for 5,000-ton parcels from Houston to Rotterdam, Netherlands. Styrene is an important product on this trade lane too.

Demand is well matched to tonnage supply in the Caribbean and rates have not depreciated greatly. Base oils in the amount of 1,500 tons are attempting to ship from Houston to Rio Haina, Dominican Republic, for a level in the mid-$40s/t, but this rate was last achieved for a basis of 2,500 tons and might be hard to achieve for the smaller volume.

Levels are taking a bit of a hammering into the east coast of South America too. Given that there is quite some ethanol demand, rates probably ought to be showing some stability, but there are ships that still have completion space. An outsider has gone on berth with 11,500 tons of caustic from Mississippi, U.S. to Santos, Brazil, which paid in the low $40s/t. No new base oils have been seen moving southbound, apart from contractual volumes. It seems there are some base oils being discussed from Brazil back up to the U.S. Gulf, however.

Base oils appear to be rather slow along the route into India and the Middle East Gulf. Instead, the talk has been of ethylene dichloride, which has caused a ship to go on berth in June, and which will have plenty of space left to fill.

Europe

The entire European coastal market has been heavily disrupted by a succession of public holidays, with more still to come. When trade is as disjointed as this, it becomes very hard to accomplish sales. Routine contractual business along the North Sea and Baltic route is less affected, and as the volume of spot business is much less than contractual demand, and most owners will have a semblance of a forwards program. The owners who are reliant purely on the spot market have struggled badly though. A ship was open for nearly two weeks on Continental Europe before it fixed a cargo of acrylonitrile from Ventspils, Latvia to Turkey, but still entailed ballasting up into the Baltic.

Another owner fixed 10,000 tons of fatty acid methyl ester from Rotterdam to Huelva, Spain, for a rate that is claimed to have been just $150,000, which, if true, is some $40,000-$50,000 below the market. The Mediterranean has generally been supportive towards owners, and ships rarely remain open for long in the Mediterranean. Base oils have been rather slow throughout. A couple of recent fixtures have been noted out of the Baltic, which are the first such shipments in a while. Inter-Mediterranean has been reasonably active on base oils too, with shipments into the usual North African ports, as well as Turkey, Italy and Israel.

The amount of new tonnage that is coming out of the shipyards along the transatlantic route is really beginning to make itself felt, and westbound transatlantic is one of the routes that seems to attract more entrants on the service, with the inevitable result that rates decline further. Aromatics in 5,000-ton parcels from Rotterdam to the U.S. Gulf are routinely fixing in the mid $30s/t. One of the new players seems to want to get involved in the Mediterranean to the U.S. Gulf, in addition to the two established owners on this route. There is seldom enough business for the regular owners out of the Mediterranean, but that has meant rates have been stable for several years. That will probably change if the new player is determined to maintain its schedule of sailings.

New entrants are also trying to force themselves onto the trade lane into the Far East as well, which has resulted in offers in the low $70s/t for routine 5,000-ton parcels from Rotterdam to China, compared to existing owners aiming for rates in the $80s/t at least. Fewer base oil enquiries have been noted this week.

Demand has been robust into India and the Middle East Gulf, but there has not been a shortage of space. Ship after ship has gone on berth. Most ships have filled, but a few have not, and their attempts to snatch cargoes out of thin air have led to reductions in freight levels. Parcels in the amount of 5,000-ton from Rotterdam to Mumbai, India have been going in the $75-$80/t region, but levels in the low- to mid- $60s/t have also been recorded.

Asia

Base oils have been more active within Asia, and the sizes of cargo have increased too, which is probably linked to greater product supply since demand fundamentals have not changed greatly. Rates are all largely static throughout Asia.

Export rates have been responding to the shortage of space in the first half of June on the transpacific route east, and the few ships left have been seeking rates in the mid $40s/t for 5,000-ton parcels from Korea to Houston. Some base oils have been discussed in this direction. The market to Europe is unchanged, but illogical. On one hand, owners are achieving $115/t for 3,000-ton parcels from Korea to Rotterdam, while other owners accept rates in the $70s/t. Some traders have considered sending base oils in this direction too.

A little more business has been detected on both the eastbound and the westbound routes out of the Middle East Gulf to India region. Space is available for the majority of cargoes, although some of the smaller parcels have not been generating much interest from owners, unless they combine with something already booked. Base oils are still routinely quoted out of the Red Sea ports, as well as from Sitra, Bahrain and Al Ruwais, United Arab Emirates.

Adrian Brown is a senior market analyst for chemicals and base oils with SSY Shipbrokers, London, can be reached atfix@ssychems.comor +44 12 0750 7507. Information about SSY can be found atwww.ssyonline.com. In the Houston office,Steve Rosenthalof SSY’s Chemical Tanker Department can be reached directly at +1 (713) 652-2700 and Jordi Maymi in Singapore can be reached at +65 6854-7127.