It has been another week of intense activity on routes into Asia from Europe, the United States and Middle East, and freights have climbed even higher. The magnitude of material being shipped however has caused some debate as to how much longer this can continue.
We have some charterers who indicate that their customers in China are satiated and will not need further imports in May. Others too suggest that unless the export of finished goods from China to the West picks up then further imports of raw materials will cease. So far however, there are still many enquiries for May shipment which suggests that demand has not yet peaked.
U.S. Gulf of Mexico
With so many vessels already committed to Asia, owners are increasingly reluctant to send more ships in this direction and are therefore keen to exploit alternatives. We have seen some movements from the U.S. Gulf to West Africa and from the U.S. Gulf to South America as a consequence. Since cargo demand on these routes is sparse, freight levels are not that high, but it may represent a better position for the ship than ending up in Asia with lots of other ships. We denote rates for 5,000 ton parcels from the U.S. Gulf to Brazil as unchanged at around $43/t.
Eastbound transatlantic numbers continue to inch downwards with mid $40s/t being an acceptable level for 5,000 t from Houston to Rotterdam. There are however some fresh styrene quotations which have yet to develop but which could cause a reversal of the trend.
Without doubt, most excitement out of the U.S. Gulf is being generated on the route into Asia. We are aware of levels in the $80s and now $90s/t being paid for cargoes of 15,000 t from the U.S. Gulf to Asia, and have seen numbers in the vicinity of $130/t for small parcels of 2,000 t from the U.S. Gulf to scheduled principal ports in China. Again, it remains to be seen how much higher freights can go before demand falters. There are however so many differing grades of cargo looking to ship that even if one segment finds the freight too hard to bear another chemical grade may still find the freight levels acceptable.
Europe
The Easter period was very slow on intra-European routes since many people were able to take an extended holiday. Space can readily be found almost all over Europe and competitive freights can nearly always be secured. We see levels for 3,000 t parcels of base oils from Liepaja to Antwerp/Rotterdam/Amsterdam as being in the upper $20s/t, with some part-cargo space available from the Baltic to the Mediterranean too.
There are ships open in the Black Sea within April, but owners are resisting charterers freight ideas of under $30/t for 4,000 to 5,000t cargoes from the Black Sea to the Western Mediterranean, which may be due to the gradual rise of bunker costs over the past couple of weeks. In Rotterdam, 380 cSt now costs around $285/t, an increase of over $50/t since mid March.
Transatlantic westbound is generally steady. There are no great movements of cargo, but benzene/toluene/xylene remains a possibility, so long as the traders do not send it all to Asia. We see space from the Mediterranean to the U.S. Gulf, and for a prompt cargo there may be a chance to fix at under the usual $60 to $65/t for 5,000 t cargo.
Shippers of phosphoric acid to India have moved up a gear and are furiously soaking up all the stainless space in the Mediterranean and northwest Europe, giving freights a slight boost. Base oils in coated space should still fetch around mid-to-high $60s/t for 5,000 t lots from the western Mediterranean to the west coast of India.
Asia
Freights outbound from Asia continue to tumble in the face of so many ships ending up there. Spot chemical demand is confined to small parcels of speciality material with no large cargoes of caustic or sulphuric acid that would normally provide a backhaul. Instead there is just palm oil, the rates for which are under an immense amount of downwards pressure.
For firm business, it is conceivable that a 5,000 t cargo of base oils from Korea to the U.S. Gulf could fetch low $60s/t. The same cargo to Rotterdam could probably pay low $70s/t, and with so many smaller ships open in Asia it could be worth exploring unscheduled ports in the Mediterranean or Africa or South America, as there may be interest from the owners at surprisingly attractive levels.
The Middle East too looks overtonnaged, though not to the same extent. Again, interesting levels could probably be unearthed from owners keen to get away from the area.
Notes
Heidmar Inc. and W-O Shipping Group B.V. have signed a letter of intent to enter into a joint venture, Womar Holdings, to commercially manage small and intermediate size tankers.
Heidmars Marida Tanker pool and W-O Shippings Yamuna and Ganges pools will become part of the joint venture and will be managed by Womar from offices in Singapore and London. The intent of the joint venture is to provide tanker owners in this market segment with worldwide market coverage, and it will initially have a combined fleet of over 30 tankers ranging in size from 3,750 dwt to 16,700 dwt.
The transaction is expected to close on May 1, 2009. Financial terms were not disclosed.
Adrian Brown is senior market analyst for chemicals and base oils with SSY Shipbrokers, London. Information about SSY can be found at www.ssyonline.com. Adrian Brown, in the U.K., can be reached directly at research@ssy.co.uk or by phone at +44 1207-507507. In the U.S., SSYs Steve Rosenthal can be reached at fix@ssychems.com or +1 203-961-1566.