29 March 2011 05:24 [Source: ICIS news]
By Lester Teo
SINGAPORE (ICIS)--Freight rates for chemical shipping from the Middle East to Asia are expected to hover higher around $60/tonne (€43/tonne) in April and May, mainly driven by the tight tonnage situation, industry sources said on Tuesday.
This reflects an increase of $5-10/tonne from January and early February, when freight rates for 10,000-15,000 tonnes of chemicals from the Middle East to northeast Asia were quoted at around $50-55/tonne, said two shipowners based in Dubai, United Arab Emirates.
Vessels were available at that time in the Middle East and Indian regions for prompt shipments, and were bolstered by a large number of palm oil ships arriving at the west coast of India with early-to-mid January shipments from southeast Asia.
However, stronger crude palm oil prices (CPO) in February and March led to fewer shipments of CPO from southeast Asia to the Middle East and Indian regions. This resulted in a reduction of available vessels for prompt shipments from the Middle East to Asia.
“Asian shipowners had to keep their vessels employed in southeast and northeast Asia from February to March due to a sharp drop of palm oil exports to India from southeast Asia because of strong CPO prices then,” said a source close to PT Berlian Laju Tankers TBK, a leading chemical tanker operator in Jakarta, Indonesia.
“Also, it didn’t make economic sense for owners to send palm ships to the Middle East and India as freights (then) couldn’t compensate the strong bunker fuel prices,” the source added.
For prompt shipments, chemical tanker operators are not able to levy a fuel surcharge.
Freights for mid-April loading for feedstock chemicals from the Middle East, including Iranian ports, to northeast Asia were heard booked at $54-61/tonne, a southeast Asian shipowner said on Monday.
Meanwhile, a South Korean shipowner said it had booked a cargo of 10,000 tonnes of paraxylenes from Iran to northeast Asia at a cost of $65/tonne for loading in the first half of April.
The port closures in Japan following the 11 March earthquake had no immediate impact on Middle East freights.
For Contracts of Affreightment (COA), a leading shipowner based in Dubai in the United Arab Emirates said demand for April shipments have been strong from COA charterers.
COA is a contract for the carriage of a large volume of cargoes, over a long period of time, between specific ports or regions.
“Demand has been good for April, we have fully booked five ships loading from the Middle East to northeast Asia,” the shipowner said.
A Singapore-based vessel charterer echoed the same sentiment.
“Prompt tonnage from the Middle East has been tight since February and we have had postponed deliveries to our Indian customers after the situation eases,” the charterer said.
Strong bunker fuel prices in February at $670-690/tonne FOB Middle East amid unrest in the Middle East, was another key factor that drove up freight rates.
Bunker fuel prices for March have settled slightly lower at $650-670/tonne FOB Middle East, but most shipowners said that the lower prices are not helping to defray operating costs.
“Although bunker fuel prices in March were slightly lower than February, the strong prices are still eroding freight revenue,” said a chemical and petroleum tanker operator based in Singapore.
However, some relief is expected for the industry from mid-May as palm oil shipments for April pick up. Several shipowners have booked palm oil cargoes from southeast Asia to the Middle East and Indian regions for loading in the second half of April.
“We have completed bookings for palm oil shipments to the west coast India for April and have heard of more palm oil cargoes coming up in end-April,” said a leading Malaysian palm oil carrier.
“Demand for edible palm oil from the Indian market is slowly picking up as they will be looking to stock up from now to June as the Islamic world is celebrating [Hari Raya Puasa] in August,” said a palm oil shipbroker.
($1 = €0.71)
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