LONDON (ICIS)--Lotte Fine Chemicals (LFC) has time chartered an ammonia tanker so it can reduce its reliance on third-party suppliers, a source at the South Korean group revealed on Wednesday.
The firm will load the 40,000-tonne capacity BW Nantes in Saudi Arabia in early May, with the vessel's inaugural cargo for downstream units and customers at Ulsan, expected in late May to early June.
LFC will likely receive 32,000-33,000 tonnes as the balance of 7,000 tonnes has been sold to Hanwha on a spot basis for early June discharge at Incheon.
No price has been heard for that parcel, but the buyer expects a formula price from SABIC of $340-345/tonne FOB (free on board) for the cargo that will load in Jubail.
"We have agreed a 12-month time charter for the BW Nantes, and the vessel will load up to 120,000 tonnes of SABIC material over the next year as part of a long-term formula-priced FOB supply agreement," the source said.
He added the vessel will likely return to the Kingdom later in the second quarter, possibly to lift some contract material from Saudi Arabian Mining Co (Ma'aden).
The pair signed a supply agreement in late 2016 for 200,000 tonnes/year, but some of that volume is available on a FOB basis at the buyer's option, the source added.
In late 2016, LFC signed supply deals with three suppliers for a combined 550,000 tonnes of ammonia for arrival at Ulsan in 2017.
The group signed deals with Koch and Ma'aden for 200,000 tonnes each, and with Trammo for 150,000 tonnes.
At the time, LFC said it would look to buy 100,000 tonnes on a spot basis, versus the 50,000-60,000 tonnes of non-contract material acquired in 2016.
By taking control of a vessel, LFC will have the ability to source spot cargoes on a FOB basis rather than simply receive cargoes from traders or manufacturers on a CFR (cost and freight) basis.
Potential destinations for such spot cargoes over the coming months include the Arabian Gulf, Indonesia and Algeria.