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May 16, 2018

Volume 1 Issue 20

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SSY Base Oil Shipping Report

The market in the United States looks to be more stable this week. Europe sees more positives than negatives, although there are more public holidays still to come this month. Asia may have bottomed out too.

U.S. Gulf

There are still ships that have to find last-minute completion cargoes along the Far East route, and, as such, some very competitive figures are perhaps achievable. In one instance, 3,000 tons of ethanol was reportedly fixed from the U.S. Gulf to Korea at just $49 per metric ton. Traders are weighing up the possibility of sending styrene to Asia, and there are possible cargoes of ethylene dichloride, ethanol and ethyl benzene. A couple of small parcels of butanol are being worked from the U.S. Gulf to China, and a few more paraxylene opportunities have been seen.

Space for May loading on the transatlantic route is looking rather scarce, and owners who do still have positions are contemplating raising freight ideas. Looking into June, however, there is a new batch of ships inbound which might take the edge off any increase in freight this month. Styrene is under consideration, and there have been parcels of caustic, vinyl acetate monomer, glycols, cyclohexane, biodiesel and ethanol. Traders are looking to send 3,000 tons of base oils from the U.S. Gulf to Haifa, Israel.

There have been no particular changes in the Caribbean. Caustic is still one of the main commodities, perhaps with vegetable oil close behind. The base oil tender into Cartagena, Colombia, for around 3,000 tons to be delivered at the end of May has seemingly not been awarded so far.

Business into the east coast of South America has picked up a little this week. Ethanol continues to move into Brazil in 10,000 to 20,000 tons sizes. Ten thousand tons of ethanol was fixed from the U.S. Gulf to Talara, Peru, and Conchan, Peru, for a rate said to be in the mid $70s/t, and 9,000 tons of base oils were booked from Houston to Brazil. Several new caustic and ethylene dichloride requirements have featured this week, and there is some sulfuric acid to be moved from Canada to Chile.

May space to India and the Middle East Gulf is rather tight, and outsiders are being encouraged to put ships on berth. Ethanol is the primary driver, though the next tender for 20,000 tons has been postponed slightly.

Europe

The month of May tends to be an unproductive month in Europe due to the proliferation of public holidays occurring in a short space of time. It is usually hard to conduct business when the cargo supplier is away, or the buyer, or when the ship owner is out of the office. When all three are away simultaneously, business tends to grind to a halt. This year however has been different, and somehow there has been a constant flow of material along the North Sea and Baltic route, and apart from a small number of prompt open positions the majority of ships are kept moving. At the moment, biodiesel and products associated with automotive fuels are in ascendancy. Base oils are still moving out of the Baltic, but the volume is not that great. Freight rates are pretty constant.

It has been fairly busy southbound into the Mediterranean, and ships are filling well. Rates are more or less unchanged. Base oils have been studied to Turkey, for instance, but demand is more focused on biodiesel, paraxylene, caustic, sulfuric acid, methanol, acrylonitrile, acrylates, styrene, aniline and ethanol.

It has been a steady week on the northbound route, but it owes its stability more to the intra-Mediterranean market being able to soak up spare capacity than any particular growth in northbound volume. Base oils have not really featured, and instead demand is comprised of caustic, pyrolysis gasoline, toluene, wax, vegetable oil, biodiesel and glycerine.

Intra-Mediterranean cargo flows have been pretty steady, with biodiesel being especially active. Evidently, a change in regulations that has been brought forward from end June to end May has inspired some of the demand. Base oils have been reasonably active, with several enquiries from the previous week being converted into fixtures.

Several more tramp operators have used the tightness of scheduled tonnage along the transatlantic route to allocate yet more ships to the westbound route for loading within May. The cargo lists continue to grow too, so it is probable that even more tonnage will find its way onto the route. The upshot is that rates are not really rising, at least not for the big bulk cargoes. Smaller parcels however may see significant increases – 2,500 tons of aniline from Rotterdam to Freeport, U.S., was booked at very close to $90/t for example, which is a very strong level. The base oil side is rather subdued currently, although there has been some movement of hydrocracker bottoms into Canada and the U.S. Gulf.

The couple of base oil requirements along the Far East route noted last week from Antwerp and Kavkaz, Russia, have now been covered, and 3,400 tons rubber process oil was booked from Hamburg to China. Space has become quite scarce, and a parcel of 3,000 tons of octene from Tarragona, Spain, to Map Ta Phut, Thailand, ended up on a vessel that was scheduled into India and the Middle East Gulf only. The rates on these parcels to Map Ta Phut are very high; the April shipment going for over $200/t. Traders are starting to look at aromatics and even styrene to Asia, which might entice some outsiders on berth.

More base oils have been seen into both India and the Middle East Gulf this week, but space is relatively tight and so bargain rates might be hard to achieve. There are a lot of small chemical parcels around as well, creating competition for the space, but if there is a sufficient number of these small lots, some owners may elect to commit extra tonnage to the route.

Asia

There has been a little more stability within Asia. The intra-Far East routes, for example, are not under quite so much pressure, with a few more cargoes starting to appear, including some bigger shipments of paraxylene, as well as benzene, methyl tertiarybutyl ether, styrene and toluene. Base oils have been rather lame, however, and that applies to the other routes in the domestic Asia trades. The northbound routes have been particularly dull this week. Ships that are in the intra-Southeast Asia area are also finding spot business to be a bit hand-to-mouth at the moment, although contractual volumes are pretty decent.

Due to the lack of transpacific space on the export route, most of the May benzene shipments have been ditched, or else deferred to June. In addition to benzene some mixed xylenes got fixed to the U.S., and several paraxylene requirements have been noted to the U.S. and Mexico. Rates are still hanging at unchanged levels. To Europe, the market consists of a lot of biodiesel, which suits larger medium range tankers. A couple of smaller vessels have managed to squeeze on berth from Korea, one of which looks to be taking base oils into the East Mediterranean. Rates for biodiesel are still in the $60s/t, but small parcels of chemicals and base oils can be much costlier.

A surge in demand has cleared the regional market of the very prompt vessels that were around along the India and the Middle East Gulf route. Some base oils have been talked from Al Ruwais, U.A.E. to the west coast of India, with fixing levels in the low- to mid $20s/t talked basis of 8,000 to 10,000 tons sizes. It has been suggested that the approaching Ramadan may cause the eastbound market to slow, but for the moment there is still quite a lot of business to be fixed from India and the Middle East Gulf. There has been an apparent increase in the amount of Iranian cargoes quoted, and it has been suggested this is in response to the re-imposition of sanctions by the U.S., and that charterers are using the 180 day grace period to clear their books. Some owners who regularly deal with Iran, but who also trade with other entities in the Middle East, may have also decided it prudent to curtail their usual Iranian trades. Westbound space seems somewhat tight, which explains the $70/t that was reportedly paid for 6,000 tons of benzene from Mangalore, India, to Tarragona. Further interest in benzene has been noted to the U.S. and Europe.

Adrian Brown is a senior market analyst for chemicals and base oils with SSY Shipbrokers, London, can be reached at fix@ssychems.com or +44 12 0750 7507.  Information about SSY can be found at www.ssyonline.com. In the Houston office, Steve Rosenthal of SSY's Chemical Tanker Department can be reached directly at +1 (713) 652-2700 and Jordi Maymi in Singapore can be reached at +65 6854-7127.