European trade has improved slightly, lifting freights by a dollar or so on some routes. The American market has been steady, but with no significant tonnage being fixed into the region space looks set to remain tight. Asia is a disaster for many ship owners unable to find any cargo with which to send their ships back to Europe or the United States to reload.
U.S. Gulf of Mexico
Nothing much has changed on the U.S. market. Cargo volumes are steady if unexciting. Rates however remain firm since there is not a lot of choice on which vessel to fix. Loading dates too tend to have to be arranged around ships already scheduled on a service.
Some charterers are thinking of enticing vessels to ballast into the U.S. Gulf from South America, Europe or West Africa to rectify this problem, but there is a cost attached to this option.
Where cargoes can be fitted around existing scheduled space, rates have not altered, and a 3,000 ton cargo from the U.S. Gulf to the east coast of Mexico, for instance, would cost around $36/t, and around $55/t to the north of Brazil. Where rates tend to be stronger are to Asia and India, partly because there are not many suitable candidates and partly because owners just do not want to send ships out there. For example, 10,000 tons of base oils from Houston to Mumbai would need something like $85/t before an owner would express interest.
Europe
Contractual volumes are healthier in Europe, and it has taken only slightly more spot business for rates to have edged up here and there.
Southbound into the Mediterranean is especially active, and it is here that we see many base oil enquiries. A 4,000 ton base oil cargo from Antwerp-Rotterdam-Amsterdam to Marmara would command around $50/t. Inter-Mediterranean trades are busier too, with more chemicals, vegetable oils and clean petroleum products quoted.
Transatlantic westbound is nothing special, and from the Mediterranean to the States there are several ships able to offer prompt loading.
From Europe to Asia is still the most interesting route. Most June loaders are full, and those who do have space are able to charge accordingly. Rates into the Yangtze are the most expensive with 2,000 tons of base oils paying anywhere from $120 to $150/t. In some cases, it may work out cheaper taking containers rather than bulk loads, although this will appeal more to the lube additive people than to the base oil brigade.
Europe-to-India is active too, and a 5,000 ton cargo from Antwerp-Rotterdam-Amsterdam to Mumbai now costs around $68/t.
Asia
The odd cargo of palm oil or biodiesel from the Malacca Straits to the Mediterranean or Northwest Europe has done little to make a dent in the amount of tonnage open in Asia. Rates for the larger cargoes from the Straits to the Mediterranean work out at around $40/t or less, and the 4,000 to 5,000 ton lots of biodiesel from the Straits to the Western Mediterranean are around $60/t.
A 5,000 ton cargo of chemicals from China to Turkey paid in the low $80s/t, which would suggest that a similar parcel of base oils from Korea to Turkey could cost around $70/t. There are reports of large cargoes of benzene being fixed from Korea to the U.S. Gulf in the low $40s/t, which could provide an opening for a small base oils parcel to act as completion, perhaps for around $53/t for 5,000 tons.
There is not much happening on the India and Middle East Gulf to Mediterranean and Europe service, giving scope for traders to see if arbitrage will open for base oils from Iran to Turkey. A 5,000 ton cargo would cost around $55/t presently and about the same from the west coast of India.
Notes
It is fairly common to see exports of base oils from the Latvian port of Liepaja. However, due to draft restrictions in the port, most of these cargoes have been small or restricted to loading on smaller vessels. The port authority however hopes that this will change shortly. It has tendered for a dredging contract to deepen the approaches to the port and hoped to award the contract yesterday, June 9. The successful applicant would be expected to start work in August or September 2009 and have the work completed by the end of July 2012.
The aim is to deepen the port fairways from the current depth of 9.5 meters to 12.5 meters, with the rest of the port to a depth of 12 meters.
The majority of the cost of the project is to be paid for by the EU, with the Baltic state and the port authority contributing some 25 percent of the total. It is expected to cost LTL22.70 million, which is equivalent to around $44.5 million.
In 2008, Liepaja handled around 4.19 million tons of cargo, making it the third busiest port in Latvia. Once the dredging work has been completed, the port authority hopes to double or even triple that amount, much of which will be in liquids. When exported from the Baltic, most Russian base oils are shipped through the ports of Liepaja, Riga, Svetle (Kaliningrad) and Tallinn.
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.