U.S. Gulf of Mexico
It has been a busier week on routes out of the U.S. Gulf. Contractual nominations have picked up, causing February space to tighten on routes into the Caribbean, South America and Far East. Rates are strengthening on the back of the tightness, adding several U.S. dollars per ton to freight costs.

Parcels of 5,000 tons from the U.S. Gulf to the East Coast of Mexico now cost around $23/t, and small 1,500 to 2,000 t parcels from the U.S. Gulf to Colombia could fetch between $40 and $50/t. Numbers on the U.S. Gulf to the east coast of South America are also up by a dollar or two.

The biggest gains of the week have been seen on Transatlantic eastbound and from the U.S. Gulf to the Far East. We assess 5,000 t from the U.S. Gulf to the Far East as being in the mid $40s/t, but an urgent prompt requirement could see that figure increase sharply. Similarly, a 5,000 t cargo from the U.S. Gulf to Rotterdam could find space in March at around $43/t, but we have seen 8,000 tons of biodiesel from Bayonne to Rotterdam command a level in the high $40s/t for instance. We have also seen 1,000 t parcels from New Orleansto Rotterdam pay low $60s/t on prompt tonnage.

Europe
The routes that are seeing the most activity from Europe are those going east, and this constant drip-feed of vessels being siphoned off to take chemicals, acid, vegetable oils and base oils to India, Middle East and Asia is allowing a sort of respite to occur on the European coastal markets.

Freight levels in these short-sea markets have hardly altered, however, and it will take a lot more cargo volume moving deep-sea before a dent is made in the number of vessels present within Europe. We assess freights for 5,000 t cargoes from Rotterdam to Mumbai as being in the low $60s/t, and the same cargo to Taiwan or Korea would cost around $75 to $76/t. Traders will have their eyes on a couple of the ships which have part-cargo space from the Mediterranean to West Africa, but owners freight ideas still tend to be $60 to $65/t for 5,000 to 7,000 t cargoes.

Asia
We see fewer chemical opportunities for ships that are open in Asia and that wish to return to Europe or the U.S., mainly because the types of cargo that are available in Asia are not competitively priced when shipped back to the West. This then leaves ship owners with little alternative than to forage in the palm oil markets. To be fair, demand still seems to be strong, and we see a number of February and early March cargoes both to China and the Indian Ocean. Given the number of new vessels coming out of Asian shipyards in March and April, finding space should not be too difficult.

We continue to assess 5,000 t cargoes from Korea to the U.S. Gulf as being around $77/t, and to Rotterdam around $90/t, but should the number of open ships continue to grow, then these levels may slip. We see rates for 5,000 t from Korea to Brazil as $80 to $90/t.

In India and the Middle East Gulf, the markets continue to be buoyant both to Asia and Europe. We have worked various possibilities back to the Mediterranean, and have found owners may accept levels below $60/t, but only for big volumes of 10,000 t or more. For small parcels of base oils from Iran to the Mediterranean, numbers would more likely be in the $80s/t or even $90s/t.

Notes
A couple of ship owners who are regularly seen transporting base oils have revealed worse financial results than expected.

In reporting its fourth quarter 2008 results, Eitzen has revealed a net loss of $190.30 million, ten times the loss incurred in the same period during 2007. The main reason for the big drop is an impairment charge of $156.20 million to better reflect the lower book value of the ships, which the company believes has decreased by around 20 percent during the second half of 2008. At year end the companys net asset value was around $600 million. The company calculates fourth quarter freight rates for the Eitzen chemical fleet below 30,000 dwt fell by 5.8 percent compared to the previous quarter.

Danish chemical tanker owner Erria reported this week it expects 2008 losses of 8 million kroner ($1.38 million). Poorer fourth quarter results are partly to blame, as well as the company having to accept lower time-charter revenues this year. The drop in the dollar against the Euro has been a contributory factor.

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.