Pricing and Markets
June 3, 2021
Benzene Update
European and American benzene supply will return to normal in the second half of the year to ease the imbalance between supply and demand
Echemi 2021-06-01
After uncharacteristically tense in the first half of the year, the supply of benzene in the United States and Europe is expected to return to normal in the second half of 2021, thereby alleviating the demand for Asian goods.
In the United States, in addition to the winter storm in mid-February that destroyed more than 4.6 million barrels per day of refinery capacity in Texas and Louisiana, limited imports from South Korea and substandard refinery operating rates also suppressed U.S. benzene stocks.
Supply disruption in the United States and limited materials in Asia disrupted transportation to Europe, while the rapidly lagging market, strong Chinese demand and limited ship supply further restricted Asia’s exports to Europe and the United States in the first half of 2021.
However, with the easing of market price cuts around the summer and an increase in global supply, European benzene consumers are expected to have more products arriving in Europe to make up for the gap.
After the maintenance of ExxonMobil Chemical’s Botlek plant in Rotterdam, the Netherlands, production resumed, and the shortage is expected to be alleviated.
As Korean benzene cargoes begin to arrive in the U.S. Gulf in large quantities, U.S. supplies will increase around July. According to KITA data, the amount of benzene shipped from South Korea to the coast of the United States from May 1 to 10 is roughly the same as that of the entire April. The United States is expected to surpass China in May and become South Korea’s largest importer of benzene.
According to sources, domestic production in the United States is also expected to increase. New crown vaccination and improved demand for summer travel and air travel have prompted US refineries to increase the production of gasoline, aviation fuel and middle distillates.
Due to the amazing profit rate of benzene in the first half of the year, Asian producers are operating at a high speed in order to maximize profits, leading to an increase in the export volume of Asian countries. From January to April, the Asian benzene-naphtha price gap averaged US$240/ton, and once hit a high of US$475/ton in mid-April.
In contrast, the average price difference between p-xylene and naphtha in January-April was US$224/ton, and manufacturers have shifted their focus to the production and sales of benzene.
According to sources, with the gradual recovery of supply, profit margins in Asia are still uncertain in the second half of the year, and benzene may maintain its advantage in the first half of the year.
Platts Analysis wrote in an April report: “The recovery of local demand in Western countries may accelerate rapidly in the next six months. They predict that the net utilization rate of refineries may reach about 95% in the middle of the summer. “
But market participants are not sure whether this increase will be enough to suppress prices when demand in the downstream value chains of benzene is strong and the US manufacturing industry is recovering strongly. Styrene producers are not expected to significantly reduce prices, and there are no SM devices planned to be overhauled in the United States for the remainder of 2021.
Downstream demand remains healthy
The demand for downstream products such as styrene and phenol is expected to remain healthy. The reduction in COVID-19 cases and the progress of the vaccination program provide a glimmer of hope for alleviating the blockade across Europe, while supporting further demand for benzene and its derivatives. The increase in car travel in the summer also means that refineries may increase the production of road fuels and increase the supply of benzene raw materials.
A source said that the actual demand for styrene is expected to be stronger in the second half of the year, but the decrease in SM imports from the United States may put pressure on benzene prices.
A trader said: “The increase in styrene production capacity in Asia will have a huge boost to benzene.”
Until 2021, China’s downstream new capacity has been delayed and started simultaneously, which has increased the demand for benzene, especially in southern China where commercial storage has not been widely used. At the same time, China’s integrated refineries have an oversupply of benzene, and the start of the styrene plants at these refineries has been postponed to 2022.
Previously, due to the sale of goods outside Asia, the availability of goods for Asian buyers decreased, and end users in Asia were dissatisfied with the sharp increase in prices. FOB Korea’s benchmark price hit a seven-year high in April and May several times.
There is a big gap between the bids and quotations in the CFR Asian market. Sellers are considering global delivery prices. The current spot quotations of CFR Asian buyers are almost 10 times higher than the 2021 fixed-term contract benzene price.
A buyer said: “It is difficult for Asian buyers to tolerate the substantial increase in costs caused by reasons unrelated to Asia. The entire styrene chain will eventually be normalized in the second half of the year.” Many sources said that the situation in the first half of the year was intermittent. Sexuality is unlikely to become the norm in the future.
June 3, 2021
BASF Raising TPU Prices
BASF to increase prices for thermoplastic polyurethane systems in North America
WYANDOTTE, MI, June 3, 2021 – BASF will increase prices for all thermoplastic polyurethane (TPU) products in North America by $0.35/lb for orders shipping on or after June 15, 2021, or as contracts allow.
June 3, 2021
BASF Raising TPU Prices
BASF to increase prices for thermoplastic polyurethane systems in North America
WYANDOTTE, MI, June 3, 2021 – BASF will increase prices for all thermoplastic polyurethane (TPU) products in North America by $0.35/lb for orders shipping on or after June 15, 2021, or as contracts allow.
June 3, 2021
Container Ship Costs Spike
“People Are Panicking Now” – Container Ship Charter Rates “Have Gone Out Of Control”
by Tyler DurdenThursday, Jun 03, 2021 – 02:45 PM
By Greg Miller of American Shipper,
In a sign of just how frenzied the container market has become, a freight forwarder is reportedly paying $135,000 per day for a short-term charter of the S Santiago, a 15-year-old container ship with a capacity of 5,060 twenty-foot equivalent units (TEUs).
“Charter rates for short employment … have gone out of control,” said Alphaliner in its new weekly report.
“Depending on the sources, the ship would have obtained anything between $100,000 and $145,000 per day, an absolute historic high. The name of the charterer has not been fully confirmed, although it is believed to be a forwarder.”
An industry source speaking to American Shipper on condition of anonymity said the rate was $135,000 per day, the duration was 45-90 days (one round voyage with an option for a second) and the charterer was Chinese freight forwarder 3 Seas.
The source said that there is “more and more enquiry every day” with “people panicking now” amid “unprecedented times.”
Alphaliner said that “this colossal rate is substantially higher than the already whopping $70,000-$90,000 per day — depending on the final duration — agreed recently by Hapag-Lloyd for a two- to three-month employment of the 4,308-TEU CMA CGM Opal.”
The industry source told American Shipper that the S Santiago deal was concluded last week and that he wouldn’t be surprised if a new record were reached this week.
According to U.K.-based valuation and data provider VesselsValue, the 2006-built S Santiago is owned by Cyprus Sea Lines and is currently valued at $38.48 million.
To put the enormity of the charter deal in perspective, the shipowner will earn back one-sixth of the ship’s value in a single voyage — and one-third of the vessel’s value if the charterer takes the option for the second voyage.
What this means for cargo shippers
The historic S Santiago transaction is yet another big red flag for cargo shippers. Charter rates like this only make sense if freight rates are high enough for the charterer to turn a profit.
It also underscores just how tight vessel supply is.
Alphaliner reported that only 2.7% of the global container fleet was inactive as of May 24, totaling 660,662 TEUs. Of that, 70% (461,779 TEUs) was inactive due to ships being in the yards for repairs or maintenance.
And cargo shippers will not be getting any relief in the near or medium term from newbuild deliveries.
There has been a surge of orders recently, but those are for 2023-2024 deliveries. Clarksons Research Services estimates that fleet growth in 2022 will fall to 2.5% from 4.6% this year.
What this means for ship lessors
The S Santiago rate was so high because ship lessors, otherwise known as non-operating owners (NOOs), much prefer to put their tonnage on multiyear charters and lock in long-term profits.
“Those electing to accept short-term charters are likely doing so to capture fantasy rates near term,” said Fearnley Securities, referring to the “off the charts” S Santiago transaction.
According to Alphaliner, “The market has become one of long-term charters, with 43 of the 51 fixtures reported in the past two weeks concluded for durations of 24 months or over.” Of that total, three charters were for five years’ duration, nine were for four years, 10 for three years and the remainder for two years.
“The medium-term prospects remain bright for NOOs,” affirmed Alphaliner. Listed NOOs include Costamare, Danaos Corp., Seaspan owner Atlas Corp., Global Ship Lease, Navios Partners, Euroseas, Capital Product Partners and MPC Containers.
What this means for liners
The record-setting charter market implies medium-term downside risk for liner companies.
Today’s unprecedented freight income more than offsets stratospheric charter costs, but NOOs are forcing liner operators to accept longer durations to get the ships. If freight rates were to fall significantly by 2023-24, charter rates negotiated in 2021 will be much more painful to liners’ bottom lines.
ZIM offers the most extreme example, because unlike other liners, it charters its entire fleet and does not own vessels. As of Sept. 30, 2020, 71% of its capacity was chartered for a year or less. The company touted the advantage in its IPO prospectus, stating, “Short-term charter arrangements allow us to adjust our capacity quickly in anticipation of, or in response to, changing market conditions.”
But as ZIM has rapidly increased its fleet size to capture freight-rate upside, charter durations have ballooned. Its fleet size nearly doubled from 59 vessels in mid-May 2020 to 110 as of mid-May 2021.
According to Alphaliner, charters by ZIM over the past month include the 6,648-TEU Kobe for 44-48 months at $45,000 per day; an extension of its charter of the 9,784-TEU Santa Linea for 40 months at $42,500 per day starting in Q1 2022; and an extension of its charter of the 3,534-TEU Bach for 36-38 months at $31,250 per day.
During the latest quarterly conference call, ZIM CFO Xavier Destriau conceded a shift to longer durations out of necessity.
“We will continue to bring in vessels in order to capture [revenue] from new lines we are opening and to renew existing charters,” said Destriau. “We are not changing our strategy, which is to continue to rely on the charter market. What is changing is the allocation of short-term charters versus long-term charters due to the current market conditions, obviously.”
https://www.zerohedge.com/markets/container-ship-scores-charts-fantasy-charter-rate-135000day
June 3, 2021
Container Ship Costs Spike
“People Are Panicking Now” – Container Ship Charter Rates “Have Gone Out Of Control”
by Tyler DurdenThursday, Jun 03, 2021 – 02:45 PM
By Greg Miller of American Shipper,
In a sign of just how frenzied the container market has become, a freight forwarder is reportedly paying $135,000 per day for a short-term charter of the S Santiago, a 15-year-old container ship with a capacity of 5,060 twenty-foot equivalent units (TEUs).
“Charter rates for short employment … have gone out of control,” said Alphaliner in its new weekly report.
“Depending on the sources, the ship would have obtained anything between $100,000 and $145,000 per day, an absolute historic high. The name of the charterer has not been fully confirmed, although it is believed to be a forwarder.”
An industry source speaking to American Shipper on condition of anonymity said the rate was $135,000 per day, the duration was 45-90 days (one round voyage with an option for a second) and the charterer was Chinese freight forwarder 3 Seas.
The source said that there is “more and more enquiry every day” with “people panicking now” amid “unprecedented times.”
Alphaliner said that “this colossal rate is substantially higher than the already whopping $70,000-$90,000 per day — depending on the final duration — agreed recently by Hapag-Lloyd for a two- to three-month employment of the 4,308-TEU CMA CGM Opal.”
The industry source told American Shipper that the S Santiago deal was concluded last week and that he wouldn’t be surprised if a new record were reached this week.
According to U.K.-based valuation and data provider VesselsValue, the 2006-built S Santiago is owned by Cyprus Sea Lines and is currently valued at $38.48 million.
To put the enormity of the charter deal in perspective, the shipowner will earn back one-sixth of the ship’s value in a single voyage — and one-third of the vessel’s value if the charterer takes the option for the second voyage.
What this means for cargo shippers
The historic S Santiago transaction is yet another big red flag for cargo shippers. Charter rates like this only make sense if freight rates are high enough for the charterer to turn a profit.
It also underscores just how tight vessel supply is.
Alphaliner reported that only 2.7% of the global container fleet was inactive as of May 24, totaling 660,662 TEUs. Of that, 70% (461,779 TEUs) was inactive due to ships being in the yards for repairs or maintenance.
And cargo shippers will not be getting any relief in the near or medium term from newbuild deliveries.
There has been a surge of orders recently, but those are for 2023-2024 deliveries. Clarksons Research Services estimates that fleet growth in 2022 will fall to 2.5% from 4.6% this year.
What this means for ship lessors
The S Santiago rate was so high because ship lessors, otherwise known as non-operating owners (NOOs), much prefer to put their tonnage on multiyear charters and lock in long-term profits.
“Those electing to accept short-term charters are likely doing so to capture fantasy rates near term,” said Fearnley Securities, referring to the “off the charts” S Santiago transaction.
According to Alphaliner, “The market has become one of long-term charters, with 43 of the 51 fixtures reported in the past two weeks concluded for durations of 24 months or over.” Of that total, three charters were for five years’ duration, nine were for four years, 10 for three years and the remainder for two years.
“The medium-term prospects remain bright for NOOs,” affirmed Alphaliner. Listed NOOs include Costamare, Danaos Corp., Seaspan owner Atlas Corp., Global Ship Lease, Navios Partners, Euroseas, Capital Product Partners and MPC Containers.
What this means for liners
The record-setting charter market implies medium-term downside risk for liner companies.
Today’s unprecedented freight income more than offsets stratospheric charter costs, but NOOs are forcing liner operators to accept longer durations to get the ships. If freight rates were to fall significantly by 2023-24, charter rates negotiated in 2021 will be much more painful to liners’ bottom lines.
ZIM offers the most extreme example, because unlike other liners, it charters its entire fleet and does not own vessels. As of Sept. 30, 2020, 71% of its capacity was chartered for a year or less. The company touted the advantage in its IPO prospectus, stating, “Short-term charter arrangements allow us to adjust our capacity quickly in anticipation of, or in response to, changing market conditions.”
But as ZIM has rapidly increased its fleet size to capture freight-rate upside, charter durations have ballooned. Its fleet size nearly doubled from 59 vessels in mid-May 2020 to 110 as of mid-May 2021.
According to Alphaliner, charters by ZIM over the past month include the 6,648-TEU Kobe for 44-48 months at $45,000 per day; an extension of its charter of the 9,784-TEU Santa Linea for 40 months at $42,500 per day starting in Q1 2022; and an extension of its charter of the 3,534-TEU Bach for 36-38 months at $31,250 per day.
During the latest quarterly conference call, ZIM CFO Xavier Destriau conceded a shift to longer durations out of necessity.
“We will continue to bring in vessels in order to capture [revenue] from new lines we are opening and to renew existing charters,” said Destriau. “We are not changing our strategy, which is to continue to rely on the charter market. What is changing is the allocation of short-term charters versus long-term charters due to the current market conditions, obviously.”
https://www.zerohedge.com/markets/container-ship-scores-charts-fantasy-charter-rate-135000day
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