It has been a much quieter week on all fronts. With only a few exceptions, most European routes have been slower. In the United States, there has not been much spot market activity, although most routes are full for prompt loading due to heavy contractual volumes. In some ways, Asia has been busier with the mountain of open tonnage gradually becoming smaller, although it will be a long time before it is back in balance.
U.S. Gulf of Mexico
There is very little by way of fully open positions in the U.S. Gulf, and combined with a healthy contractual market, there are few opportunities to ship from the U.S. Gulf in any direction. Fortunately, the spot market has almost evaporated too, leaving some to speculate where the market in this region is headed.
July certainly sees more open space towards Asia, at least so far, and could offer a sizeable reduction in freight for those prepared to take the risk. We believe a 5,000 ton cargo of base oils from Houston to scheduled, principal ports in Asia could be fixed today for July loading for below $80/t, which represents a saving of nearly $10/t compared to a week ago. However, as we go into July, unless there is a substantial rise in cargo enquiries, this level could drop even further. But equally, it could rise again if trade flows again.
Other routes such as U.S. Gulf to the east coast of South America look more settled, however, and few owners are able to offer space until late July or August. The U.S. Gulf-to-the-Carribean market is also fairly stable and would need an injection of tonnage to cause the rates to wobble, but with few ships fixing into the U.S., there is not much chance of that happening just yet.
Transatlantic eastbound is not busy with conventional cargoes, but instead there seems to be interest in shipping material such as MTBE, methanol, UAN and even small parcels of naphtha and diesel back to Europe, most of which are rarely seen in this direction. Rates are hovering around $50/t for a 5,000 ton cargo from Houston to Rotterdam, but we have seen levels in the mid-high $50s/t for cargoes like this loading from unscheduled ports in the U.S. Gulf.
U.S. Gulf to Mediterranean is tight too, and we have heard of fixtures of 2,000 to 3,000 ton cargoes going from the U.S. Gulf to Turkey for $70/t. Another route that is tight is the U.S. Gulf to India and Middle East Gulf trade lane. A 5,000 ton cargo of base oils from Houston to Mumbai could cost around $95/t, subject to space, and we know of several such cargoes of base oil all looking for a carrier, so far without much success.
Europe
The midsummer holiday caused the market in the Baltic to grind to a halt quite early on in the week. Elsewhere, the bulk of European short-sea routes were dull and inactive. Perhaps the liveliest market was the southbound run into the Mediterranean, with many different cargoes seen. Base oils into Turkey were predictably in evidence, and we know of rates of around $70/t that were paid for a cargo of 3,500 to 4,000 tons from the Baltic.
Transatlantic westbound has seen nothing really special fixed across, with the majority of cargoes ending up on contractual tonnage. We know of 5,000 ton cargoes of easy chemicals from Antwerp-Rotterdam-Amsterdam to the U.S. Atlantic Coast that were worked in the mid- to high-$30s/t, and some larger lots of caustic that went in the $20s/t.
Demand from Asia seems to have held up for European exporters, with unchanged levels of mid $90s/t discussed for 5,000 ton cargoes from Antwerp-Rotterdam-Amsterdam to China. There have been plenty of cargo requirements into India and the Middle East Gulf, including base oils, but owners remain nervous about ending up in Asia and are talking slightly higher rates than last week.
Asia
Palm oils have been very active out from Asia, especially to Europe and the Mediterranean. Rates have been terrible for owners however, with levels in the $30s/t fixed into the Mediterranean for example. A few ships managed to escape into the U.S. with biodiesel, but otherwise owners are caught in the cycle of fixing palm oils into India and the Middle East Gulf and then either choosing to ballast back to Europe, or accepting very low levels for chemicals back to Asia again. Breaking this cycle is difficult, particularly with bunker prices remaining firm.
In circumstances like this, it may be possible to achieve a really attractive freight to bring a ship back with base oils. Stemming such a cargo from Iran for example could give surprising results. As a guide, we know of 5,000 ton cargoes of chemicals that have fixed back into the Mediterranean in the $40s/t.
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.