September 9, 2015
Volume 17 Issue 52
SSY Base Oil Price Report
Parts of Europe have cooled substantially and certain trade lanes in Asia are fragile. U.S. markets are mostly robust, although there have even been a few cracks starting to appear there.
The styrene mania on routes to Europe is over (for now at least), leaving a couple of September ships with some work to do to fill out.
Rates for 5,000-ton parcels from Houston to Rotterdam will probably have slipped from the peaks of low $80s per metric ton, which were concluded only last week. Although through expediency, such levels were not actually acknowledged by many and instead levels were pegged in the low- to mid $70s/t. However, new levels have yet to be established and in effect, the very next fixture will set the market.
Base oils are understandably not part of the cargo mix these days, although there has been a cargo of 13,900 tons of base oils quoted from the U.S. Gulf to Durban for the end of September.
Styrene fever has hit the U.S. Gulf-to-Far East route instead, and there have been half a dozen requirements at least. Furthermore, ethanol demand has not waned, and there are still some pretty large requirements to China, Korea and Philippines. On top of all that, there are enquiries for phenol, acetone, ethylene dichloride, butanols, methyl methacrylate and acrylonitrile.
Somehow, despite all these requirements, and that there are only occasional pockets of September space remaining (to Northeast Asia, anyway), rates are deemed to be falling, with mid $60s/t said to be the appropriate level for 5,000-ton parcels. Again, there is no base oil activity to Asia from the U.S. Gulf.
On routes to the east coast of South America, there is not so much space remaining for September, which is keeping freight levels fairly steady. Parcels of 5,000 tons from Houston to Santos are likely to fetch low- to mid $70s/t these days. Base oil interest is muted, with the last imports into Brazil being sourced from the Mediterranean.
Business from U.S. Gulf to Caribbean remains pretty strong, with a plethora of vegetable oils, tallow, ethanol, clean petroleum, caustic and glycol cargoes quoted. Traders are still looking at small lots of base oil to Rio Haina, with Punta Cardon mentioned as a destination for bigger volumes. There are some workable open positions, but it is a bit hit-or-miss regarding loading dates and selected destinations. Rates are generally firm for all destinations.
Prompt space is tight to the India/Middle East Gulf region, yet here, too, rates are reckoned to be slipping, with 5,000-ton parcels from Houston to Mumbai fixable in the mid $80s/t. Base oil traders have stepped back from this route this week.
The North Sea and Baltic region has been very quiet, and as a result there is ample space available. Rates are under a good deal of pressure. An occasional base oil cargo has been booked from the Baltic, and otherwise base oil demand is mainly in-house business or material being moved to Antwerp-Rotterdam-Amsterdam, where it can be re-exported to Venezuela or India.
It has not been quite as easy for owners to send their ships back southbound into the Mediterranean. Most have been able to quickly fix down, but there are still some ships handing around. Some owners are also keen to take their ships away from the under-performing North Sea market.
Some base oil enquiries have been seen, but the majority are inter-company transfers. The uncertain situation with regards to imports into Turkey has not only affected base oils but also certain solvents and chemicals, leaving the trade into the East Mediterranean full of small gaps as owners hunt down alternative cargoes.
It has not been plain sailing going back northbound to the continent, either, and several prompt ships still have space. When it comes to loading from the East Mediterranean or Black Sea there is quite a good choice of tonnage, but loading from the West Mediterranean is heavily influenced by the strong market locally and finding suitable positions can be a chore.
Rates are generally stable. Base oils are being encountered, but mostly as transhipment cargoes for deep-sea destinations.
Regarding inter-Mediterranean trade, the West Mediterranean is still regarded as hot by many owners, and ships are trying hard to fix positioning cargoes into this area. Biodiesel has been relatively active, but ships are filling out on a much wider product base these days. Base oils have been moving to the usual destinations of Egypt and Turkey.
Transatlantic trade has picked up a little over the past week and mid September space is fairly tight. Different types of aromatics are on the cards – benzene, paraxylene, mixed xylenes, pyrolysis gasoline and orthoxylene. Caustic has been fixing as has sulphuric acid and urea ammonia nitrate. Some base oil possibilities are being explored too. Rates are edging closer to mid $40s/t for 5,000-ton parcels.
It remains pretty quiet to Asia, yet scheduled ships are gradually filling out. There is not sufficient spot business to permit any outsiders to come on berth, however. Some base oils have been looking to go to China, but these are not the usual paraffinic API Group I type of grades. Rates are rather notional, but they do not seem to have dropped further.
Prompt space going to the India/Middle East Gulf region is scarce and rates bounced back up. There are however several early October positions lurking that might cause an adjustment, but for now owners have been looking at rates in the mid- to high $70s/t for 5,000-ton parcels and $100/t-$120/t for 1,000-1,500-ton pieces.
Business within Asia has been unsettled by the Chinese economic situation that has caused some buyers to hold back from purchasing and therefore shipments have been put on hold. Volatile commodity pricing is also causing some jitters, with Asian commodity prices reacting very swiftly to changes in feedstock costs.
Base oil business seems to come in waves, with shipments into China one moment and then virtually nothing for a week or two afterward. The only positive note is that base oils are moving out of all production sites in nearly every direction, which at least provides some kind of employment for ships.
Rates are essentially soft throughout the region. Base oil cargoes of 6,000-7,000 tons from two Northeast Asian ports to two ports in Southeast Asia fetched between high $30s/t and low $40s/t, for example. As always, there are some prompt ships available on every trade lane, but there is not a critical oversupply of vessels and space has thinned towards the middle of the month, meaning that the majority of ships has gained some 10-15 days of forward employment. A few lucky ships are only open in October, but these are the exception.
Benzene arbitrages are fickle on the transpacific export route. However, there is not a great deal of space either. Rates have dipped to more normal levels – 12,000 tons of benzene from Korea to the U.S. Gulf is believed to have gone in the mid $50s/t.
Space to Europe remains scarce and owners are bullish on numbers. Styrene in the amount of 5,000 tons from Korea to Antwerp-Rotterdam-Amsterdam was willing to pay a respectable low $100s/t, but owners rejected the cargo as too low and pushed for rates in the $110/t-$115/t territory. As it happens, 5,000 tons of styrene was fixed from Korea to Turkey at $115/t. A base oil shipment of 10,000 tons was heard to have fixed from Korea to Havre and Antwerp-Rotterdam-Amsterdam at $97/t. Large slugs of biodiesel are also attracting ships on berth to Europe.
The Middle East Gulf/India region is still pretty busy, but there are a lot of inbound ships, which means there should be enough space available for most requirements. Delays in Kandla and Al Jubail have eased to just a couple of days too, meaning that ships are out quicker and ready for backhauls. There are still a number of small base oil shipments locally.
Eastbound routes are much quieter, which will pull rates down. Westbound however continues to see good demand for products such as benzene, paraxylene, methanol, MTBE, caustic, styrene vinyl acetate monomer, ethyl acetate and glycols. There have even been enquiries to ship base oils out of the Red Sea to Antwerp-Rotterdam-Amsterdam. Rates remain unchanged.
Adrian Brown is a 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 at email@example.com or by phone at +44 12 0750 7507. In the London office SSY’s Ian Roberts can be reached at firstname.lastname@example.org or +44 20 7977 7560 and in Singapore Jordi Maymi at +65 6854 7127.