U.S. Gulf of Mexico
Freight rates are pegged at unchanged levels this week on most key routes. Contractual volumes account for the bulk of vessel space, making it trickier to locate the perfect position for some spot requirements. Were it not for the influx of tonnage into the U.S. Gulf, rates could have actually increased. U.S. Gulf to the west coast of Central America is a good example. Contracts have filled most scheduled ships on this trade lane, and so a couple of outsiders have come on berth and are now hawking their space around.

We see a 3,000 ton cargo from the U.S. Gulf to Cartagena, Colombia, fetching low $40s per ton. Not much is happening on the southbound route to the east coast of South America, and it may be possible to pick up a competitive freight. From the U.S. Atlantic coast to Santos, a 2,000 ton cargo paid around $70/t, and 5,000 tons from the U.S. Gulf to Santos would fetch close to $40/t.

Transatlantic to Northwest Europe is steady for August, but looks to be waning for September. Into the Mediterranean, however, is a different story, and space is tight. The U.S. Gulf to India remains active, and space is tight. The U.S. Gulf to Far East has a couple of ships with the last few remaining tanks to fill for August, but on the whole this trade lane is contracted out.

Europe
Volumes slackened in the North Sea and Baltic areas, demonstrating how fickle trade can be in this area. Down to the Mediterranean, however, has been fairly strong with plenty of cargo showing. Rates have edged up slightly on this route. It is much easier to fix northbound, as there is ample tonnage supply, and to ship 5,000 tons of base oils from southern Spain to Antwerp-Rotterdam-Amsterdam should cost no more that $20/t.

Inter-Mediterranean routes are fairly quiet at the moment, and again, tonnage is fairly easy to find for most requirements.

Transatlantic is horribly slow right now, and we see freight levels declining. Cargoes of 5,000 tons from Antwerp-Rotterdam-Amsterdam to the U.S. Atlantic coast have slumped into the upper $20s/t, and there is a good supply of tonnage available. The same too applies for Mediterranean-to-United States routes. Europe-to-Asia is beginning to look softer with less business quoted. Rates are expected to slip unless China starts to buy chemicals again. The run out to India remains quite strong with plenty of different cargoes quoted, making it harder to bag a bargain for a cargo of base oils.

Asia
Aromatics continue to be fixed out of Asia, even for September, although traders tend to be more reticent about fixing that far out at this stage. In addition, we see other cargoes quoted, such as sulphuric acid, biodiesel, ethanol, glycols and molasses, as well as the ubiquitous palm oil traffic.

Tonnage is certainly a lot tighter than several months ago, and we do hear of some levels being fixed in the $60s/t and even $70s/t for 5,000 tons of chemicals from Korea to Northwest Europe. However, we believe that, given a degree of flexibility on loading, levels just under these can still be achieved. There are still some ships that have space to the United States, too, and for now, rates are unchanged on that route.

The Middle East Gulf-India regions are buzzing with plenty of small deliveries locally. Unfortunately for many ship owners with larger vessels there are just not that many bigger enquiries around, which means they have to risk loading just a part cargo and hope to fill out.

Few cargoes are moving to Europe, and with an influx of imports, the region is once again looking overtonnaged, and rates are coming off.

Notes
There have been some interesting predictions made about the vegetable oil markets recently. Since vegetable oil is a core commodity and accounts for massive amounts of vessel space globally, it is important to be aware of the possible implications for other products such as base oil.

The key facts are that coconut oil consumption is rising, whereas soya bean oil production is in decline. We are told that world demand for coconut oil is expected to recover quickly, with European usage nearly reaching the level of 2007/2008. Conversely, soya oil exports are falling as the key supply region of Brazil and Argentina use more of their own production domestically.

In short, for shipping this means that South America will become less attractive for ship owners, especially those with larger vessels that would normally be used to transport soya bean oil. Smaller vessels should still be in demand, however, since biodiesel exports to Europe will increase. After all, that is one of the reasons why there will be fewer soya oil exports as the beans will be crushed locally to make the biodiesel.

South America is also one the major growth economies and we expect to see chemical imports continue to expand, again mostly using smaller or more sophisticated tonnage than used for vegetable oils. Base oil exporters and importers may need to be aware of these developments.

Concerning Asia, an increase in demand for and production of coconut oil could drive freights up as palm oil exporters compete for space with other cargoes, such as base oils and chemicals. In the short term, tonnage supply is well ahead of demand, and rates are not expected to soar to the levels seen at the end of 2008, but it is an important factor as we move forwards out of recession.