There was very little excitement in the U.S. over the past week. Demand, and rates, have not really gone down, nor have there been any of the usual movements associated with de-stocking prior to the end of the year, which has everyone in the shipping market puzzled. It is clear that the U.S. Gulf-to-Far East route is a victim of commodity pricing. Aromatics are either cheaper in Asia, or the arbitrage is not open wide enough to permit movement. Aromatics are one of the major commodities on this route, and a lot of ship owners are waiting to see what producers will do, because they clearly are not exporting, but still producing.

One of the questions has to be whether the tax bill that is due on year-end inventory may be lower than the regional price differences and that producers are therefore more willing to pay the tax than lose even more money by slashing prices in order to offload inventory.

Such a situation has never really been seen before. Another angle is that Asian customers may not wish to receive product at even lower prices because it affects the subsequent value of any downstream product, and since they did not anticipate a price crash in the first place, they already have significant stocks of material bought at higher prices and thus any further imports could undermine the value of any downstream production. Consequently, a number of ship owners have decided to pull out of the U.S. Gulf-to-Far East market in December, and thereby freight levels have stayed unchanged this week.

Transatlantic eastbound has been busy with at least 25,000 tons of styrene fixed for mid- to second half of November, with rates for 5,000 ton parcels ranging from $47 per metric ton to $50/t.

In the U.S. Gulf to Caribbean market, there was a tender for 4,000 tons of base oils to Colombia and a couple of caustic tenders to Mexico, but overall this area is quiet and there is ample tonnage available for most eventualities.

U. S. Gulf-to-east coast of South America is mostly routine, with the occasional parcel of paraxylene or caustic quoted, and rates are static.

The route from the U.S. Gulf to the Far East and U.S. Gulf-to-India-Middle East Gulf have begun to see some base oils interest with cargoes quoted but not fixed. Rates are somewhere just above $60/t for 5,000 ton lots from Houston to Mainport Far East while the same cargo to Mumbai could cost upper $80s/t due to a tightening space situation.

Europe

The parcels market in the North Sea and Baltic slowed significantly over the past week. Fortunately, the fuels markets have been fairly steady and a number of chemical tankers have been noted lifting clean petroleum cargoes. There were a couple of industry events taking place during the week but not the kind that causes the market to flatten. Again, most players are perplexed as to why the market is not more vigorous.

Southbound into the Mediterranean is not exactly bright and there are still a lot of open positions able to cover most requirements. Rates are rather weak, especially into the East Mediterranean. A 3,000 ton parcel of base oils to Turkey could likely attract offers in the low- to mid- $50s/t and should the loading dates coincide with the right ship, there is a chance these levels could go down into the $40s/t.

Northbound is calm, with mainly pyrolysis gasoline, vegetable oil and methanol creating the opportunities for owners to fill.

Inter-Mediterranean markets have been disappointing too, with many ships ending the week with the same open positions that they had at the start. Base oils have seen some chances to place product into Turkey, with some material coming from the Black Sea and some from the Mediterranean. Rates show some reductions, but with bunker prices remaining weak, what used to be a cheap rate is now becoming the norm.

Transatlantic westbound has been fairly busy with steady demand for pyrolysis gasoline, cumene, caustic, mixed xylenes and paraxylene, with methanol traders now checking freight levels from the Black Sea to the U.S. Gulf. Base oils have been quiet to the Americas, and in fact one of the few quotations, a cargo from the Mediterranean to Brazil, was withdrawn without fixing. Of particular note to the base oils market, there is increased reluctance from ship owners to want to send their ships to Nigeria following a robbery and kidnapping of two seamen from a Turkish-controlled tanker off Nigeria last week. The ship was not carrying base oils at the time, but is one of the regular base oil tankers.

Europe-to-Far East is very slow and there is quite some December space available. Rates for 5,000 ton parcels have fallen to low $80s/t and owners confirm that they will give careful consideration to rates in the high $70s/t for December. The base oil arbitrage is apparently open and at least one cargo of bright stock has been booked to China. The arbitrage is apparently open to India and the Middle East Gulf, but freights here are more robust thanks to better demand, and levels in the $80s/t can be anticipated from northwestern Europe, while Mediterranean loading may see rates in the $70s/t.

Asia

Unlike the other regions, domestic Asias chemicals business is thriving, suggesting that buyers are taking advantage of the lowest prices available anywhere globally and without the need to wait long periods for delivery. A large proportion of the Asian fleet is employed until the first week of December or so as a result. Freight levels have been steadily increasing, with 3,000 ton parcels from Ulsan to mid China now costing low to mid $20s/t, with the same parcel to Singapore commanding mid $30s/t, at least. The main problem is finding a ship with space on the busy routes, such as Korea-to-China. Base oils are particularly busy out of Korea at the moment and it is common to see the laycan adjusted to suit the carrier.

Asia export markets are steady. There is less benzene around but instead there is methanol to both Europe and the U.S. Rates remain firm.

Palm oil markets to India are stable but perhaps fewer requirements have been seen to China. The palm oil market to Europe remains pretty busy and freights are stable.

The Middle East Gulf-India region is described as busy and rates fairly strong. A 5,000 ton cargo of rubber process oils from Jebel Ali to southern China is said to have gone in the mid $50s/t, for example, while 5,000 tons of methanol from the Middle East Gulf to Thailand went in the low $50s/t. Westbound demand remains strong, especially for benzene with cargoes quoted from all the main supply points in India.

Adrian Brown is senior market analyst for chemicals and base oils with SSY Shipbrokers, London. Information about SSY can be found atwww.ssyonline.com. Adrian Brown, in the U.K., can be reached atfix@ssychems.comor by phone at +44 1207-507507. In the London office SSYs Panos Giannoulis can be reached atfix@ssychems.comor +44 20 7977 7538 and in Singapore Jordi Maymi at +65 6854 7127.