Chemical Tankers: Edible Oil Markets On a Downward Path, No Support Expected

TIN news:  Ship owners active in the edible oil sea transportation will have little to look forward to over the summer months, as news from various geographical fronts are less than ideal for the support of freight rates. In a recent weekly note, shipbroker Intermodal noted that “the overall performance of each sector within the edible oil markets has remained poor for the past weeks. Apart from the veg oil exports from S. America, which has provided owners with firm rates on the back of a busy CPP market until mid-April, there is not any other positive market sign to report. Once again the palm oil markets remains very weak with further decreases on rates both in both regional and long-haul shipments.

According to the shipbroker, “the palm oil markets could be described as extremely poor. As far as the long-haul runs are concerned, there is very limited new business quoted for May. A long list of FOSFA MR tonnage combined with a very soft Intra-Asia CPP market for similar units, currently earns below USD 10,000/d and should inevitably lead to weaker rates. The going rate for FOSFA MR TC trips to MED-Europe-Continent is about 13,500$/d for tonnage with edible cargo history”.

Intermodal’s, Stelios Kollintzas, from the Specialized Products Division said that “coming to the regional market, the anticipated surge in demand for Ramadan is yet to materialize. This is to say that freight rates to India, MEG and Red Sea remain very weak with no change during the last couple of weeks. Evidence to this is the 20,000MT shipments to WCI, which are currently trading circa USD 20.00pmt. On the lookout for a positive signs for the coming weeks, the Malaysian palm oil council has announced that it will lower its crude palm export tax to 7% in May, down from 7.5% in April. It remains to see if this reduction will translate into more cargoes in the market”.

Kollintzas added that “however, the industry has now a greater issue to deal with going forward. A resolution by the European Parliament, recently called for the EU to phase out by 2020 the use of palm oil and vegetable oils in biodiesel that are allegedly produced in an unsustainable way leading to deforestation. The EU is Malaysia’s second-largest export market, accounting for 2,059,207 tonnes of palm oil products in 2016. 30% of this amount is used in biodiesel. In an initial effort to oppose that, Malaysia and Indonesia will send a joint mission to Europe next month to counter the European Union resolution”.

According to Intermodal’s analyst, “the CPP markets have significantly supported rates in the vegetable oil shipments from S. America in the past month. However, this has now cooled-off and rates are settling back again, but still remain at overall healthy levels. The going market rate to India for 40,000MT shipments bss 2 load / 2 discharge ports is high USD 30 pmt. Despite the adjustment of rates, supply prospects for Argentina and Brazil are looking positive for the coming months. However, traders have few other issues to face. Apart from excessive projected rainfalls, which are threatening the crops, strikes in Argentina are also on the rise lately. Both events are expected to have great impact to the supply chain of charterers”.

“The Black Sea market has remained fairly active, especially on the smaller parcels from 6-12,000MT to Med and Continent. On the other hand, long-haul shipments were fewer for the past month, however, still at healthy freight rates. An active CPP market within Med-Black Sea across the MR and Handy markets resulted to better rates for MRs that loaded sunflower oil from Black Sea to East since charters had to attract owners. Looking into the next months, there is little to expect from the edible oil markets. Unless, there is not any extraordinary change in the trade flows, it feels like a long summer ahead”, the shipbroker concluded.