August 23, 2017
Volume 17 Issue 52
SSY Base Oil Shipping Report
With the exception of Europe, there have been few signs of the fabled summer doldrums in either the U.S. or Asia, where rising demand for vessel space has caused freights to increase.
August space into the Far East filled out some time back, and now September is looking very tight on space. A combination of strong spot demand and heavy contractual volumes has just about eaten up what space there was, and now charterers are scouting around to see if outsiders will come on berth. Freights are nudging upwards, but not as hotly as might be envisaged. Parcels of 5,000-tons from the U.S. Gulf to China are potentially still able to secure levels under $60 per metric ton, but given the strength in demand, it is conceivable the $60/t barrier will be breached soon. Cargoes of ethylene dichloride, ethanol, phenol, paraxylene, styrene and glycols are among the contenders for space. Base oils are not in sight.
For now, styrene is the hot commodity eastbound. August space is the most sought-after, but equally it is the scarcest, and 5,000 tons from the U.S. Gulf to Antwerp-Rotterdam-Amsterdam is known to have gone over $55/t. September could see some easing of styrene demand, depending how quickly repairs are effected on the defective European units that are causing all this demand. Products such as cumene, glycols, cyclohexane, ethanol, vinyl acetate monomer and biodiesel are also moving. Base oils are moving to Europe too, with several requirements being worked presently.
The route into the Caribbeanis still one of the quietest regions in the Americas. There are some small parcels as usual, but they will not fill much of the open space in the area. There have been some larger lots, such as ethanol to Jamaica, and caustic to Canada and Jamaica, but these attract plenty of offers. Small base oil parcels have been fixed, such as the 1,000 tons to Rio Haina and 2,200 tons to Cartagena Colombia. Big requirements can attract highly competitive numbers, but the small stuff, such as base oils has to wait for a specific vessel which then limits the competition.
Substantial volumes of ethanol have been recorded moving into Brazil, which along with some caustic have been the main products. A requirement to ship 4,000 tons of base oils from the U.S. Gulf to Brazil has recently surfaced, and another 11,000 tons base oil cargo was booked, but this latter cargo is essentially a contractual obligation. Rates are regarded as being pretty competitive.
Ethanol is the main driver for spot volumes into India and the Middle East Gulf, with an occasional shipment of ethylene dichloride or phenol. Base oils are calm right now.
Owners along the North Sea and Baltic route are existing pretty much in a hand-to-mouth fashion at the moment. Idle time is minimal really, given the size of the fleet and the time of year, but there is not the overhang of demand to make owners sit back and consider raising freight levels. They do what they have to do in order to keep the ships moving, but that in itself is an achievement since usually at this time of year the market tends to be very slow, and idle ships would normally be commonplace. Base oils are mostly contractual right now, and even from the Baltic there have been only occasional shipments.
The southbound route has been a bit of a battleground for owners recently. There has been a sizeable amount of additional space on berth, and with fewer spot cargoes moving those requirements that did firm up have seen very aggressive numbers from owners. Methyl tertiarybutyl ether in the amount of 5,000 tons from Rotterdam to Greece saw levels down to low $40s/t. Bits and pieces of base oil activity has been noted, but volumes are small, such as 1,600 tons from Le Havre, France, to Izmit, Turkey, and 3,000 tons to Egypt.
Demand is certainly holding up northbound, and again, it is aromatics that are at the forefront of demand. Five thousand tons of benzene was being worked Sarroch, Italy, to Aveiro, Portugal, and 3,000 tons of benzene was fixed from Constanza, Romania to Aveiro. Three thousand tons of benzene was fixedLavera to Antwerp. A tender to supply 5,000 tons of benzene from Chernomorsk, Ukraine, was pushed to all destinations, as was a tender cargo of benzene from Skikda, Algeria. Toluene in the amount of 4,000 tons from Priolo, Italy, to Antwerp-Rotterdam-Amsterdam was worked, and there have been some pyrolysis gasoline possibilities from the East Mediterranean and Black Sea. Apart from the routine 7,000 tons of base oils from Italy, few other base oil cargoes have been noted.
Biodiesel is perhaps still the most active commodity in the Med these days, although volumes are a little slower at the moment. Base oil activity has been limited through August due to supply constraints. Several spot cargoes have shipped to Morocco and Tunisia, and routine movements have been noted into Turkey and Egypt. On the whole, rates tend to be competitive, although where timing is a factor or certain approvals are required rates can be quite strong, as was the case this week with 6,000 tons of pyrolysis gasoline from Venice to Greece that seemingly paid $30/t.
Owners are still finding the westbound trade to be disappointing. Traders have been toying with possible shipments of benzene, toluene, paraxylene and pyrolysis gasoline, with only the pyrolysis gasoline having materialized in sufficient volume. The rest just seems to be on hold. Rates remain under $30/t, which is the level heard for 5,500 tons tertiary butyl ether from Rotterdam to Houston, for instance. The occasional small parcel of base oils has been observed but base oils are not really a spot commodity on this trade lane at this very moment.
There really is no change to report on this route, which is becoming a bit of a mantra. There are just about adequate volumes for scheduled ships, but nothing really much that other outsiders can get their teeth into. As such, rates remain stable. Between 7,000 tons and 8,000 tons of base oils have been quoted from Antwerp-Rotterdam-Amsterdam to Singapore and Korea, and there are the usual process oils from Hamburg, Germany, to China, but these will probably not attract the most competitive of offers from outsiders. Phosphoric acid in the amount of 18,500 tons from Tunisia to China, on the other hand, got fixed at $50/t. The previous shipment was at $57/t, but these levels are a lot lower than the $70/t of a year ago.
Base oil activity into India and the Middle East Gulf has been consigned mainly to contractual volumes, or relets from those contracts. Occasional spot volumes do get fixed, such as 9,000 tons from Livorno, Italy, to Mombasa, Kenya, and Karachi, Pakistan, and the ship is believed to have more base oils on board from Rotterdam. Small parcels of aromatics and solvents are among the main group of products looking for space. Rate-wise, levels are pretty much unchanged.
As August has progressed, so too has the amount of activity. It is especially noticeable in the Northeast Asia region where space has become particularly tight and which has prompted freight rates to rise. Three thousand ton parcels from Ulsan, Korea to mid-China can command $22/t to $24/t, and even 5,000 tons was reportedly fixed in the mid-$20s/t for August loading. Southbound rates have been bumped up too, with levels into Singapore being around $30/t to $32/t for 3,000-ton parcels. It is a busier market northbound as well, with many cargoes of paraxylene, styrene, benzene, glycols, MTBE, methanol and pyrolysis gasoline being circulated. The levels for 3,000 tons from Singapore to mid China are in the $52/t to $54/t region.
Benzene has dried up on the transpacific run, leaving only paraxylene and parcels of solvents as the main product flows. Rates continue to ease off on the export route since there is prompt space available. Base oils are still being fixed on the route to Europe. Space is generally scarce for the next month or so, especially for outport business. Rates for scheduled ports, such as Ulsan or Singapore to Antwerp-Rotterdam-Amsterdam will provide the most competitive levels, while outports will boost those numbers. It is conceivable for 5,000-ton parcels to command $60s/t, but levels can easily attain $90/t for less straightforward options. 3,000 tons of cyclohexanone from Kaohsiung, Taiwan, to Castellon, Spain, for example, achieved $125/t.
Business has started to pick up in the regional markets, and fewer open ships are being seen. Base oils are reputedly still moving from the Middle East Gulf to India, and there have been some exports from India back into the Middle East Gulf. Substantial quantities of benzene have been shipped from Sikka, Mangalore and Pipavav, India, into Al Jubail, Saudi Arabia, this month alone. Iranian chemicals and base oils have also been active. Eastbound demand is pretty solid and there are fewer vessels available. It has been a busy month in terms of exports from India, with a lot of paraxylene and orthoxylene booked from Sikka as well as something like 40,000 tons to 50,000 tons of paraxylene was fixed from Mangalore for August shipment. Westbound does not have a great deal of open space, yet nor are there plenty of requirements. Caustic in the amount of 10,000 tons from Al Jubail to Priolo, Italy, fixed at $55/t. Another vessel had misjudged the competition and had worked that cargo in the mid $40s/t, but it had not met the required standards and was rejected.
Adrian Brown is a senior market analyst for chemicals and base oils with SSY Shipbrokers, London, can be reached at firstname.lastname@example.org 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.