The best way to explain this is that while some ships have managed to latch onto cargoes that will take them well away from the Gulf, many owners who had prompt vessels have simply had to accept even lower freights than before just to be able to move their ships forward by a week or two. The problem will resurface for them shortly, unless demand builds substantially. This does not look to be the case at this stage, and so there will be a chunk of open tonnage in the Gulf at the end of the month.

And meantime, the cost of bunker fuel continues to climb, with 380 cSt grade now priced at $640 per metric ton FOB Houston.

Moreover, the entire United States is now a regulatory Emission Control Area (ECA), which means that from Aug. 1, ships can no longer use heavy fuel oil as before and must burn low-sulfur fuel (1 percent) to help reduce carbon emissions.

The problem is that low-sulfur fuel is not that readily available, and moreover there is a premium to pay, which in the case of the U.S. Atlantic Coast is around $90/t more than 380 cSt fuel oil, $110/t more in the Gulf and $250/t more on the U.S. West Coast. At some point, owners will realise that it is no longer economic to maintain a presence in the U.S. market, and a lot of this extra tonnage will then be dispersed.

Meantime, the one sector that has benefited from the extra cargo volumes (primarily clean petroleum) is the U.S. Gulf to Caribbean route, although certainly not with any increase in freight.

Freight levels have dropped on the U.S. Gulf to East Coast South America route by a couple of dollars because of the extra tonnage brought onto the berth and that has yet to fill. Minor reductions in freight were recorded on transatlantic eastbound service. Both styrene and ethanol appear to be back on the menu, but volumes are too low to alter the downward trend.

Numbers are down, too, on the U.S. Gulf to Far East route since the aromatics trade has dried up and owners are struggling to fill their remaining August ships. Rates of low to mid $50s/t are given as the market level for 5,000 ton parcels from Houston to principal ports in the Far East, but probe a little and it is possible to shave that figure.

The U.S. Gulf to India and the Middle East Gulf is also disappointing, and owners with ships on berth just cannot find sufficient cargo to ensure their vessels sail full. Rates are therefore weaker here, too.

Europe
The European coastal market is reasonably healthy, and ships are covered for at least a week or so forward. Many are even booked through until September, which is quite unusual for a summer market, but which we predicted could happen since a gradual restocking programme was always likely to occur, especially at a time when commodity prices were looking attractive.

Stronger feedstock costs, however, may just allay the enthusiasm for a while. In terms of freights, the North and Baltic seas remain pretty much unchanged. Some regular fixtures may have seen numbers knocked down compared to previous levels, but on the whole owners are fairly bullish and rates will probably revert to the usual barometer levels.

Southbound into the Mediterranean has seen space tighten after the wave of cheap fixtures over the previous week, and the latest round of enquiry is producing higher freight indications.

Northbound is generally stable. Until those southbound ships arrive towards the end of the month or early September, the Western Mediterranean is looking very tight for prompt loading, and owners are seeking substantial increases. On the other hand, there is not a lot for vessels to do once open in the Eastern Mediterranean, and some very attractive freights have been seen on cargoes into the Western Mediterranean.

Transatlantic westbound is slow, and rates have edged lower. From Rotterdam to Houston, 5,000 ton parcels are talked in the low-mid $40s/t.

Europe to the Far East is busier, and cargo volumes continue to build. End August space is very hard to locate, and it may be necessary for outsiders to come on berth to clear the backlog of cargo. Rates are notionally steady so far in the mid $80s/t for 5,000 ton cargoes from Rotterdam to principal ports in the Far East.

Europe to India and the Middle East Gulf is also seeing a bit more demand and space is filling well, although not by enough to cause freights to rise significantly.

Asia
Charterers continue to quote August requirements within the Domestic Asian market, particularly for aromatics into China and Taiwan, although some base oil traffic has also been encountered in the region.

Rates tend to be unchanged across the board, with 3,000 ton parcels from Ulsan, Korea, to mid China weighing in at around $25/t and Singapore to mid China seeing $45-47/t for the same kind of shipment.

Asian Export demand is a bit quiet at the moment, but not by enough to cause any real alteration to rate levels.

Palm oil rates have stabilised at current levels, which is typically low-mid $70s/t for 15,000 ton cargoes from the Malacca Straits to the Black Sea. The westbound route out of the Middle East Gulf and India is a bit tighter this week, with fewer outsiders in position.

Rates for 5,000 ton parcels Middle East Gulf to the Mediterranean are back into the $70-75/t region, excluding Iran.

Eastbound rates also seem to have bottomed out, in spite of there being a number of ships with open space. With Ramadan still in progress, the amount of fixing remains subdued.

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 at fix@ssychems.com or by phone at +44 1207-507507. In the London office SSYs Jordi Maymi can be reached at fix@ssychems.com or +44 20 7977 7560.