Demand for chemicals into China has continued at a strong pace, confounding those who declared that demand would dry up in May. Base oil demand too has been forthcoming, with large cargoes to ship from the United States, Europe and India. Some seasoned observers however, whilst welcoming the opportunities that this provides, have been asking themselves how much longer it can continue.
What is perhaps significant is that charterers are looking to ship to other Asian countries, such as Korea, Taiwan and Japan and not just China, as Asian commodity prices in general respond to the stimulus provided by Chinese demand. Elsewhere, chemical shipping remains pretty much in the doldrums.
U.S. Gulf of Mexico
In general, the U.S. Gulf is fairly tight on prompt space in any direction.The U.S. Gulf to Asia is the star performer, with many different types of cargo, including base oils, looking to ship.
We see freight prices at very high levels, even for relatively easy cargoes such as benzene/toluene/xylene, MTBE and biodiesel. From Houston to Taiwan 5,000 tons of speciality chemicals is $90/t, while small parcels quite easily command levels of $130 to $140/t. This tightness of space feeds into other long-haul routes such as those into India, keeping freights firm in the high $80s/t for 5,000 t.
From the U.S. Gulf to Lagos 10,000 t of base oils paid in the low $70s/t, which displays a firmer tendency too. Where lower numbers can perhaps be found is on the U.S. Gulf to Mexico run, where ships that have already fixed chemical cargoes need smaller parcels to help fill the ships up. Five thousand ton rates from the U.S. Gulf to Mexico are drifting back into the mid $20s/t, or lower.
The U.S. Gulf to the east coast of South America is a similar story, where ships need spot cargoes to fill out, although owners will argue that rates must be in the mid $40s/t for a chance of consideration.
Eastbound transatlantic is an unchanged market. Styrene is being fixed in the mid $40s/t for 5,000 t cargoes from Houston to Rotterdam, and apart from some base oil requirements there is not much else except contractual business on this trade lane. But because space is generally tight in the U.S. Gulf, rates back to Europe have not altered.
Europe
European coastal markets have still to recover from the long Easter break. The markets are highly competitive with many ships chasing the same cargo. Contractual volumes are frequently 50 to 60 percent of normal volumes, which helps explain why owners are forced to be so aggressive when offering on spot cargoes.
Quite so tonnage is open in the Mediterranean, either targeting inter-Mediterranean voyages or trying to find ways to go back to Northwest Europe. From the eastern Mediterranean to the south of Spain 5,000 t of chemicals fixed at just 18 to 19/t, when they would normally pay 22 to 23 on a bad market and 28 to 30 when times were better for ship owners.
There are few chemical cargoes for shipment from the Black Sea, and now would be a good time to have a base oils cargo to ship to Northwest Europe or the western Mediterranean. With Mediterranean clean petroleum markets flat, there are opportunities to fix larger tonnage to Nigeria too.
Transatlantic westbound produced some interest in easy chemicals, such as caustic, benzene/toluene/xylene and reformate. Rates for 10,000 t cargoes from Antwerp-Rotterdam-Amsterdam to the U.S. Gulf are around $30/t. Rates for small parcels however remain steady at $60 to $70/t.
Europe-to-Asia is still busy. April space has nearly all gone, and most scheduled carriers are only able to load after May 15, meaning that firm freights are still the order of the day. Expect to pay $90/t for a 5,000 t cargo from Rotterdam to Taiwan or Korea, and mid-to-high $60s/t to Mumbai.
Asia
The list of ships open in Asia grows progressively longer, and ship owners have become resigned to the fact that they will see very low freight levels back out again. Numbers on palm oil fixtures have dropped further; 12,000 t of palm oil from the Straits of Malacca to the western Mediterranean paid $43/t, and a similar cargo to Turkey yielded just $47/t.
We have owners of ships looking for base oils back to the Mediterranean, and we believe that we can achieve rates in the $50s/t, even for fairly small quantities. Rates on the smaller intra-Asian coastal markets remain fairly high by comparison, but most cargoes in those markets are below 5,000 t.
India and the Middle East Gulf are also regions which are overtonnaged, and there are plenty of prompt positions open in the region. We believe that it is possible to fix 3,000 t of base oil from the west coast of India to Port Klang or Singapore for a lowly $35/t or so. With few cargoes quoted to the Mediterranean and Northwest Europe, it should be possible to pick up tonnage at $55 to $60/t for 5,000 t.
Notes
The Stolt Strength was reportedly released by pirates yesterday, having been held since Nov. 10, 2008. The government of the Philippines had been putting pressure on the ships owners and managers to begin negotiations with the pirates for the release of the ships crew which is composed entirely of Philippine seafarers.
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.