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Tuesday, April 17, 2001

Chem freights rise on methanol, ethanol surge

18 April 2016

The mood in chemical shipping has turned buoyant lately, mostly because of all the methanol and ethanol cargoes on the high seas.

“In the Western Hemisphere, times have been good lately,” the Netco brokerage said in its latest monthly market report.
Chemical shippers groused about too many ships chasing too few cargoes for years, and rightly so, but the big story on the water now is how long the good times will last.

Over the past year, freight rates on the major Americas chemical shipping lanes have jumped by double-digit percentages. The eastbound transatlantic leg is up more than 30% for 5,000-tonne shipments, and the same goes for charges on the US Gulf-Asia route, according to ICIS. Even rates for the not quite as busy USG-Brazil route are up 13%.

Chem freights rise on methanol, ethanol surge

SPI Marine highlighted the 12-month rate increases in its latest weekly report.

“The combination of a relatively strong spot market in major trade lanes and low fuel costs (under $160/t in both Rotterdam and Houston) are contributing to improved results for many owner/operators,” SPI said.
SPI noted that the positive mood among shippers at a recent conference in Texas could be summed up in one word – methanol.

“The demand for this product seems to continue unabated,” SPI said, “especially considering the amount of new projects due to come online in China over the next few years.”
China’s booming methanol-to-olefin sector has become a magnet for growing US methanol capacity, which more than doubled in 2015 with four new plants on the Gulf Coast. US methanol is now the cheapest in the world while China’s price is among the highest.

Chem freights rise on methanol, ethanol surge
 Chemical/Oil Products Tanker Bow Clipper - Image: miranda reiffers te loo

Hence the constant shipments from Trinidad and the US to Asia, though methanol traffic to Europe has been churning as well. SPI said 185,000 tonnes of methanol moved from the US to Europe in the first quarter this year, compared with none in all of 2015.

Ethanol remains a popular staple for chemical shippers, with China and India top destinations for cargoes out of the US.

“Ethanol exports continue to place pressure on demand for space on both the monthly service providers and spot opportunities,” the latest SPI report said.
One upside for ethanol came in a recent report from the US Department of Agriculture saying that American farmers intend to plant about 3m more acres of corn this year, which ultimately means more corn-based ethanol for export to China.

“Good news for the tanker industry,” SPI concluded.
However, Netco said there have been plenty of realists anticipating the slowdown of methanol and ethanol exports from the US and Caribbean to Asia, and there has been a slight moderation in shipments recently, “but not anything dramatic.” The broker does expect some weakening of those shipments in May.

Long-term, though, Netco said it is possible that ethanol and methanol traffic to China could stop. The brokerage cited industry watchers who believe that China will drop imports of those products because of a new domestic policy on local corn production.

“This would slow down demand for Chinese imports of ethanol and would also lessen their demand for methanol for gasoline fuel blending,” Netco said. “Assuming this is the case, we could see a dramatic slowdown in the freight market over the summer months.”
Source: ICIS

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