The mood of the market is still generally downbeat. A substantial number of tankers of all sizes have no employment, or are very close to becoming open in a prompt position.
Owners are seeing cargoes booked within an hour of being quoted on the market, which in turn has speeded up their reaction times. They are worried they might lose out if they delay. Such a situation allows no time for them to contest rates, and we generally see most rates remaining soft.
The first week or two of a new year is not totally representative, but we would expect to see a pattern or trend begin to emerge over the next 10 to 14 days. About the only sector where we do see an upside currently is from Asia, where we see a growth in demand for chemicals, which we attribute to low commodity prices in the West and plenty of cheap freight opportunities.
U.S. Gulf
At least half a dozen ships are fully open in the U.S. Gulf of Mexico, looking for cargoes in any direction that can be loaded this week, though prospects remain poor.
We see minimal chemical demand from traditional markets such as South America and the Caribbean. Our view is that the freight needed to ship a 5,000 ton cargo from the U.S. Gulf to Northern Brazil has declined further, and a rate in the low $40s per ton should be achievable.
Transatlantic cargo volumes are low, with little showing so far, apart from occasional styrene and biodiesel shipments. There is open space to both Northwest Europe and the Mediterranean from the U.S. Gulf. A 5,000 t biodiesel cargo from the United States to Antwerp-Rotterdam-Amsterdam currently pays around $35/t. A 5,000 t cargo from the U.S. Gulf to the Eastern Mediterranean would probably fetch $50 to $55/t, depending upon discharge ports.
U.S. Gulf to the Far East is spectacularly competitive at the moment. A 5,000 t cargo loading in January will secure around $40/t. Scheduled space to India still costs around $80/t for 5,000 t, but a 10,000 t cargo should attract a more favourable rate.
Europe
The North Sea-Baltic regions remain sluggish. Cargo volumes are not at regular levels, and many ships are idle. The area tends to be well covered by contractual movements, so most ships are not idle for long periods, but with so many outsiders trading in this area, especially in clean petroleum, there are always good chances to pick up competitive freights.
Inter-Mediterranean routes are particularly slow, and owners who do not normally commit their ships to deep-sea markets may be more inclined to do so this month. ENI, not normally known for being inundated with offers, received around 13 offers for their 4,300 t base oils cargo to Lattakia, with 10 ships being of an approved standard. Mediterranean to Nigeria could be an option for some of the vessels open in the area, and we would suggest trying a rate of $75/t for a 5,000 to 6,000 t cargo.
Northwest Europe to the U.S. Gulf opens up a couple of good opportunities. Slightly more chemicals cargoes are being seen, but 5,000 t cargoes from Antwerp-Rotterdam-Amsterdam to the U.S. Gulf command around $40/t.
Various chemical grades, such as pyrolysis gasoline, xylenes and even base oils are appearing for shipment from the Mediterranean to India or the Middle East Gulf.* We see numbers around $65/t for 5,000 t lots, but freights are just starting to creep upwards because of demand. The same is true on cargoes to Asia. Again, more chemical demand is pushing up freight values, and we would suggest $75/t applies for a 5,000 t cargo from Antwerp-Rotterdam-Amsterdam to scheduled, principal ports in China.
Asia
The coastal market in Asia is not seeing the same level of demand for chemicals that we see for imported cargoes from the West, which we believe is consistent with the way pricing is at the moment. If this situation carries on, we would expect to see more Asian tonnage looking for long-haul business to take them away from Asia during the Lunar Holiday period. There are signs this may be starting to happen already. Furthermore, there are a handful of brand new ships still unfixed coming out of shipyard in January, which makes the region look over-tonnaged.
Owners say there are more cargoes appearing on the market, notably chemicals from Asia and palm oils from Southeast Asia, but our view is that freights continue to decline while there is an overhang of ships. We call 5,000 t cargoes from Korea to the Western Mediterranean as $95, with maybe just an additional $5/t for loading in China.
The Middle East Gulf-India region has declined rapidly in terms of activity and freight. We see plenty of tonnage open in the area looking for cargoes both to Asia and to Europe. We suggest $75/t now for a 5,000 t cargo from Iran to the Eastern Mediterranean, and perhaps $25 to $27/t for the same quantity from Iran to the west coast of India.
Notes
Prices for scrap steel have started to climb again after a long period of decline. Indian ship breakers in particular have been active, and prices over $300 per light ton have been paid for tankers. Should the spot chemical market remain in the doldrums, it would be reasonable to expect to see more chemical tankers head for the scrap yards. We note reports that the Stolt Condor has been sold for scrap in India on private terms.
*Middle East Gulf is the international shipping industrys preferred name for the body of water known as the Persian Gulf or Arab Gulf.
This report was compiled by Adrian Brown, senior market analyst for chemicals and base oils, SSY Shipbrokers, London. Information about SSY can be found on their web site 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.