U.S. Gulf of Mexico
Freight rates on the majority of routes out of the U.S. Gulf recorded increases this week, in spite of more ships turning up with import cargoes. Particularly busy routes are U.S. Gulf to the Caribbean, including services to west coast Central America, and U.S. Gulf to India, both of which report scarce availability of scheduled tonnage and strong contractual commitments.

We have seen 3,000-ton parcels of chemicals move from the U.S. Gulf to Central America at $40/t, and would expect similar for a cargo of base oils. Rates to India are somewhat notional due to the lack of space, but we currently assess 5,000t cargoes from Houston to Mumbai as $95/t, and would expect this level to still apply.

U.S. Gulf to east coast South America is not so active in terms of spot demand, but again, strong core demand from contracts means less space available on some of the scheduled carriers. If anyone can source a cargo of base oils from Brazil or Argentina, there should be open tonnage for most directions, including the U.S., Europe, West Africa, India and Asia.

Transatlantic eastbound is not that active, but all the same, rates remain firm. Perhaps later August might see them decline if volumes remain as they are. A 3,000t parcel from Houston to Rotterdam would presently fetch around $65/t. On the U.S. Gulf to Asia run, there are some ships that can still offer August space, which throws up a wide diversity of rate levels quoted by owners, with 5,000t going anywhere from low $50s/t to high $60s/t, depending upon the vessel, the port, the charterer and the dates.

Europe
Most ships trading in the North Sea and the Baltic areas have a reasonable amount of work, occasionally allowing firmer freight levels to be done. However, the market into the Mediterranean has moderated, and we now see rates for 3,000t base oils from Antwerp-Rotterdam-Amsterdam to west coast Italy as being around $40 to $45/t; to Turkey, the levels would be around $60 to $65/t.

There are plenty of ships open in the Mediterranean, especially the western Mediterranean, and finding a suitable candidate for base oils into Turkey or Greece would not be a problem. There are a few more chemical cargoes such as methanol and caustic starting to reappear from the Black Sea which might give some small competition for base oils, but generally these base oil cargoes are carried on older ships in the fleet.

Transatlantic is not so active, and plenty of space can be found, even from the eastern Mediterranean. A 5,000t base oil cargo from the eastern Mediterranean to the U.S. Gulf Coast would probably command around $60/t currently. Europe-to-Asia trades are slack, but with few owners willing to risk going back to Asia, rates are virtually unchanged. Demand into India and the Middle East Gulf is still strong with chemicals, vegetable oils, acid and base oils. A 5,000t cargo from the Baltic in this direction would cost around $100/t.

Asia
Greater demand for palm oil into India and China has drawn off yet more ships that were open in Asia, lifting freights both regionally and also out of Asia. Furthermore, aromatics traders have spotted an opportunity to send benzene to both Europe and the United States. Such cargoes are mostly larger lots, i.e., 10,000 to 15,000t sizes, the freights for which are anywhere from $45 to $65/t, depending upon timing, size of cargo, load and discharge port. The effect is to bump up levels from Asia for all commodities, including base oils.

We believe that rates may still work in the $50s/t from Korea to Rotterdam for 5,000t lots, at least for the moment. The Middle East Gulf and India areas are also experiencing a resurgence in trade, with freight rising by $2 to $3/t for cargoes into India, meaning that 3,000t cargoes of base oils from the Middle East Gulf to west coast India now cost in the mid $30s/t. Rates back to Europe however are unchanged.

Early notification has been received from Indian agents that nighttime navigation for tankers at Kandla, on Indias west coast, might be implemented in the near future. Nighttime navigation for tankers was suspended some time ago due to a shortage of qualified pilots. However, the situation has changed and more pilots have become available. The port believes that nighttime navigation would speed up tanker operations and improve turnaround times, which it hopes would in turn boost traffic through the port.

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.