SSY Base Oil Shipping Report


We have noticed a distinct tightening of space on several key trade lanes. Of particular note are those routes from the U.S. Gulf and Northwest Europe into Asia, and we feel that this is having a knock-on effect onto other routes such as transatlantic and several of the inter-Americas services. Taking it one step further, all this additional tonnage ending up in Asia and the Indian Ocean could prompt a rate war on outbound business from Asia.

U.S. Gulf of Mexico
Locating prompt space in the U.S. Gulf is becoming more problematical. We notice this especially on the U.S. Gulf to Far East route on which most owners have filled all their March space. That said, we sense that there are some owners who may pull vessels off other routes in order to service this bonanza of cargoes. Should this occur, there may indeed be more second-half March space to be allocated.

It also raises the question of when to fix. We have seen the reports of 15,000 ton chemicals cargoes being fixed from the U.S. Gulf to South China in the low-to-mid $70s/t and large cargoes of base oils paying in the $70s/t. We however have been able to fix 5,000 t cargoes from the U.S. Gulf to scheduled principal ports in the Far East for less than $55/t for loading later in March. But with space going fast, such numbers may no longer be achievable.

There has been a distinct tightening of space on services such as U.S. Gulf to West Coast South America. From the U.S. Gulf to the Caribbean space is a bit tighter too, but as most parcels tend to be small on this route we do not see any great change to the rate. The same applies from the U.S. Gulf to the East Coast of South America, but an interesting development is the possibility of ethanol exports resuming from Brazil to the United States and India. This might make it worthwhile for owners to put ships on berth to Brazil. We have already seen a 20,000 t cargo of ethanol fixed from Brazil to India, and we expect more to appear.

Another potentially interesting development to follow is what will happen to the eastbound transatlantic route should Europe impose import duties on subsidized U.S. biodiesel. That market has gone completely silent this week. Rates have not yet fallen off the mid $40s/t for 5,000 t lots from Houston to Rotterdam, but biodiesel is vital for this route, and without it we envisage owners repositioning ships onto alternative routes. Equally, we see biodiesel cargoes being sent to alternative destinations, such as Asia and Peru, but it will be difficult to place the entire volume that normally ship to Europe.

The flood of chemicals, acids, vegetable oils and a few base oil cargoes heading out to India, the Middle East Gulf and Asia has reinforced the impression that space in Europe is not as plentiful as it used to be. Freights have moved up a couple of U.S. dollars per ton for bigger cargoes, but are still below $80/t basis scheduled ports.

Rates for 1,000 t cargoes however can vary enormously. We have seen $90/t paid for Southeast Asian discharge, but we have also seen $130/t fixed for an outport in China. We have seen owners oppose charterers ideas of low-to-mid $40s/t for 10,000 t cargoes of acid from the Mediterranean to the West Coast of India, but would suggest levels of low $60s/t as still obtainable from Rotterdam to West Coast India.

With such variety of cargoes around, owners may want a dollar or two more for base oils to Lagos, but interesting routes such as Mediterranean or Northwest Europe to Brazil may elicit a more favourable response.

Westbound transatlantic has firmed a bit with more aromatics and gasoline components seen, lifting 5,000 t lots from Rotterdam to the U.S. Gulf to $45 to $46/t, but owners know it is a tough call sending ships to a region where the staple backhaul cargo of biodiesel may be in jeopardy. Inter-European trades are mostly flat with usually ample space available.

As expected, pressure is beginning to build on freight rates out of Asia in most directions due to an imbalance of open tonnage. So many ships are booking cargoes into the region, combined with a batch of newly-constructed units appearing from shipyards in March and April, that demand cannot keep pace.

Palm oils account for the bulk of outbound vessels, but demand for edible palm oil is weak in the West. China and India continue to import it, but Pakistan is saturated. We have seen low $60s/t being paid for 18,000 t cargoes of chemicals from Korea to the U.S. Gulf, and we know of a 10,000 t chemicals cargo that was worked from China to Turkey for under $70/t.

As we go further into March, it is conceivable that freights could decline further. Intra-Asian routes have not been affected by the additional tonnage so far, and indeed a slight upwards trend has been detected on certain routes. India and the Middle East Gulf regions remain as busy as before, with no real change observed on freights out of the region.

Adrian Brown is senior market analyst for chemicals and base oils with SSY Shipbrokers, London. Information about SSY can be found at Adrian Brown, in the U.K., can be reached directly at or by phone at +44 1207-507507. In the U.S., SSYs Steve Rosenthal can be reached at or +1 203-961-1566.

Note: Middle East Gulf is the international shipping communitys preferred name for the body of water known as the Persian Gulf and Arab Gulf.

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