Global spot freight rates under pressure as chems shipping demand slows further

Author: Marta Fern

2020/07/14

LONDON (ICIS)--Shipping demand has fallen notably and spot freight rates on some routes are under pressure on the back of good availability of open space and a sluggish recovery post-lockdowns in many chemicals markets.

The shipping market is also entering, a little earlier than usual, the period of summer lull.

A crash in demand for clean petroleum products (CPP) floating storage also bears on the chemical shipping market.

This is true especially for larger parcels as several vessels previously storing CPP now offer open space for chemicals, adding to the already widely available spot space.

According to sources, the market is so long in places that some ship owners are laying up ships and two older, 1990s-built stainless steel chemical tankers have recently been sold for scrapping.

INTRA-EUROPE
Chemical tanker spot shipping continues to be slow intra-Europe, following freight rates declines of June.

Last week, the Mediterranean freight rates edged down again at the high end of the quoted range.

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There is still plenty of prompt spot space available, with fewer enquiries for the second half of July.

Interestingly, sources have quoted a more diverse range in prices, but volumes are reportedly squeezed.

Downstream industries are gradually ramping up operating rates following coronavirus restrictions easing; however, many players expect it will take weeks or even months before any significant uplift in upstream markets is reflected in increased shipping requirements.

Several European players said they continue to register decreased contract volumes, leading to ample space on the majority of intra-European routes.

Moreover, spot volumes are fluctuating and in recent weeks there has been more interest in fixing smaller parcels.

TRANSATLANTIC WESTBOUND
Spot freight rates on the Transatlantic (TA) westbound route moved down $2/tonne last week as slower interest in spot fixtures noted in the last few weeks resulted in some tankers sailing light on this route, bearing on spot prices.

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June chemical tanker arrivals into Houston, Texas, were down 10% year on year, according to shipping data from the Greater Houston Port Bureau (GHPB).

MORE FREE VESSELS
Interestingly, there are reports of some vessels - previously storing CPP during coronavirus lockdowns - entering the chemical shipping market and aside from the regular owners frequenting the route, outsiders have been seen competing for business.

Moreover, some European ship owners are looking into the Transatlantic route as an alternative to the weak northwest Europe (NWE) market, which typically suffers from the summer lull at this time of the year.

EUROPE TO ASIA
Sentiment is dull in the Asian chemicals freight market, with very few fresh enquiries for the second half of July and August.

Freight rates on the Europe to Asia route have also softened at the turn of the months and last week were assessed flat on the lack of new known business.

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Shore tanks in China are filling up, said sources, which could potentially reduce China’s near-term petrochemicals import ability.

This is visible in the falling number of enquiries on the Europe-Asia route.

On a more positive note for the market, there has been reasonable volume of bookings for India-bound palm oil products, reflecting to some extent the recovery in India’s downstream manufacturing activities.

However, the near-term outlook for demand remains uncertain due to ongoing fears of a second wave of the coronavirus pandemic.

Persistently fragile global economic growth forecasts are causing many buyers to be unwilling to take any risks, adopting instead a a cautious wait-and-see approach.

Front page picture source: Petros Giannakouris/AP/Shutterstock 

Focus article by Marta Fern