Base oils freight rates to rise on increased costs – shipbroker

23 February 2012 16:10  [Source: ICIS news]

LONDON (ICIS)--Increased costs for shipowners will lead to massive consolidation in the fleet for shipping base oils, a senior research analyst said on Thursday.

With bunker costs increasing by 220% between 2009 and early 2012, numerous smaller shipping companies will disappear from the market, said Adrian Brown of shipbroker Simpson, Spence and Young (SSY).

“The bigger owners are becoming bigger, swallowing up smaller companies, taking out the competition,” he said at the ICIS World Base Oils & Lubricants Conference in London.

“There will be insolvency as smaller owners, perhaps family-owned businesses owing a lot of money to the banks, are squeezed financially. The tonnage remains in the market but under new ownership,” he added.

Costs were also being added for maintenance and crew training.

“If you’re going to trade in this [base oils] market, you need to have tip-top vessels,” said chemical shipbroker Jordi Maymi of SSY.

Base oils freight rates will rise in the longer term because owners need to pass on extra costs and the fleet is not growing.

Extra demand for shipping space will come from palm oils, biodiesel, ethanol, Middle East chemicals, and the new chemicals from shale gas exploration in the US. Base oils shippers will be competing for vessel space with these cargoes.

“There will be a big increase in cargoes fighting for the same ships as base oils,” added Maymi.

The conference ends on Friday.

By: Barbara Ortner
+44 20 8652 3214

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