FocusSpot chemical shipping suffers in downturn

17 October 2008 16:05  [Source: ICIS news]

By Dan Horlock

LONDON (ICIS news)--Activity in the chemical shipping spot market is suffering from fears of a global recession, making it difficult for traders to complete any business, said players on Friday.

One source stated that the fluctuating stock markets was making players nervous and that brokers were playing a waiting game until there was less risk in the market.

“Buyers and sellers do not know what to expect on pricing and it’s safer to wait until the market is more predictable,” the broker said.

A London-based broker said that plant closures or reductions in operating rates were an indication of the problems that were facing the chemical shipping industry.

“Plants are shutting down due to poor demand and if there is less available product then there is less to ship,” the source said.

Ship operators were also noticing the trend, with only contract cargoes keeping the market active.

“The only cargoes that are moving at present are contract based which can vary from the original fixed rate to current price levels,” a Baltic-based operator said.

"We have lost some spot deals recently because charterers have cancelled shipments due to poor demand."

Another ship owner was slightly more optimistic over the state of the market.

“Yesterday and today it has been quiet but fortunately all of our October space has gone and we are now working on November dates,” the source said.

An Italian ethanol producer said that while a few months ago it struggled to find open vessels, negotiations were now much easier, both in terms of timing and pricing.

“Ship operators are now far more flexible with regards to loading dates and freight rates,” said the producer.

"Prices are slightly higher than at the start of 2008, but have come off since summer highs and we expect them to fall further."

The falling price of crude oil was the one glimmer of hope that market players said could change the direction of the market.

“If the price of crude oil stabilises at around $80/tonne for some time then trade will pick up,” one trader said.

Another trader added: “The only joy we have is the price of oil now.”

However, one broker described the irony of the current market situation: “People can afford to make the product again but there is no demand for it!”

Freight rates were yet to be hit by the financial crisis although most players believed that with less product moving around rates would have to be reduced to get the market active again.

($1 = €0.74)

Rachel Howat contributed to this article
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By: Dan Horlock
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