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Aurora Tankers Monthly Report – June 2015 Summary

Core Content

This report provides an overview of the global chemical and oil product trade, with a focus on the Far East, US, and Middle East regions, as well as market dynamics affecting bunker prices and freight rates.

Main Points

Methanol Market

• US Methanol Imports: Slowed by -26% m/m and -38% y/y to 293kt, reaching multi-year lows (first time since Dec 2008).
• Reasons for Decline: Increased US production capacity due to the start-up of Methanex's 1mtpa Geismar 1 plant and OCI's debottleneck project at its Beaumont plant. Natural gas supply issues in Trinidad & Tobago and Venezuela also contributed.
• Global Methanol Market: Tight due to production outages at Methanex (Egypt), Azmeco (Azerbaijan), and Petronas (Malaysia).

Diesel Exports from China

• China's May Diesel Exports: Reached near record highs of over 650kt, more than double the April level.
• Reasons for Increase: Domestic demand remained weak, and inventory levels were rising. Increased regional demand in Asia helped maintain refiner margins.

Bunker Prices (Oct '14 – May '15)

• Spot Rates: Increased across all routes, with notable growth in Singapore / Hong Kong, South Korea / Hong Kong, and South Korea / USWC.
• TCE Rates: Also showed upward trends, with the highest increases seen in South Korea / USWC at USD26,897/day.

CPP Freight Rates (April 2015)

• Activity: CPP movements dominated the spot market, with cargo sizes ranging from 10-15kt to various destinations including India, Vietnam, Indonesia, and the Philippines.
• Regional Trends: Increased activity in the East of Suez, but softer in the West of Suez due to summer inventory building and narrowing transatlantic arcs.

Key Information

US Chemical Trade

• US Chemical Exports: Rose 28% m/m to 513kt but fell -24% y/y.
• Main Products: MTBE and SM saw strong growth, with SM exports to the Far East up 26% m/m to 188kt and to the Netherlands and Mexico up 157% y/y and 48% m/m.
• MTBE: US exports increased to 134kt, mainly due to the restart of Huntsman's plant and increased demand in Latin America for summer gasoline additive.
• US Chemical Imports: Fell -7% y/y but rose 6% m/m to 998kt. Methanol imports declined to 293kt, and PX imports doubled to 56kt.

Far East Chemical Trade

• April Imports & Exports: Total volume of seven petrochemicals was steady at nearly 6MT, up 1.6% m/m and 20.7% y/y.
• Product Trends: PX and SM imports were slightly softer, but Methanol and MEG saw firm increases of ~6% y/y.
• China's Role: Continued to be a major importer, with strong Benzene and MEG imports, and increased SM and MEOH exports.
• Japan: Maintained strong import volumes for MEG and MTBE, with MTBE up 146% y/y and 69% m/m to 97kt.
• South Korea: Exported significant volumes of MEG and SM, while imports were firm.
• Taiwan: Exports of MEG and MEOH were down, but imports of Benzene rose 26% y/y and 31% m/m.

Middle East-Far East Trade

• April Imports: 1.4MT, up 7% m/m and 25% y/y.
• Key Products: Methanol volumes increased by 50% y/y and 18.7% m/m, with Iranian imports reaching 264kt.
• PX Imports: Declined slightly from March, but remained strong at 144kt y/y.
• MEG Imports: Declined by -7% y/y to 445kt due to plant maintenance in Yansab (SABIC).

Intra-Far East Trade

• April Trade: Slightly softer m/m (-1.6%) but up 28% y/y.
• Key Products: PX and Benzene were the main performers, with Benzene imports up 358% y/y.
• MTBE: Stronger trade flows, up almost sixfold y/y, driven by demand from China and Korea.

South East Asia - Far East Trade

• April Trade Volume: Declined by -13% m/m and -39.5% y/y to 236kt.
• Trends: Despite the decline, China's imports of Methanol, PX, and MEG increased, suggesting regional dynamics are influencing trade.

Global Economic Outlook

• IMF Forecast: Global growth is expected at 3.5% in 2015 and 3.8% in 2016, with advanced economies growing at 1.6% on average.
• Downgrades: The World Bank and OECD have downgraded 2015 growth forecasts, with the World Bank at 2.8% and OECD at 3.1%.
• Economic Risks: Concerns about a potential recession, high debt-to-GDP ratios, and weak growth in emerging economies like Brazil and Russia.
• US Dollar Impact: A strong US dollar has made exports less competitive, affecting trade sentiments globally.

Chemical Trade Overview

• Global Chemical Trade: Increased by 3.7% in 2015, with steady growth in various commodities.
• Commodity Prices: Methanol, Benzene, and other chemicals saw price increases, supported by rising crude prices and supply constraints.
• IEA Notes: Global demand for chemicals has grown by 1mbd, but refinery runs have only increased by 300kbpd, indicating potential for stronger market conditions if projects are on schedule.

Regional Insights

• Asia Market: Continued to improve, with strong activity in the Pacific basin and ME.
• West of Suez: MR Atlantic earnings softened but remained above $20k/day. European refining margins supported production before seasonal turnarounds.
• Middle East to Far East: Moderate gains in chemical trade, with increased Methanol and PX imports.
• US to Far East: Trade remained firm with increased exports of SM and MTBE, although volumes for some chemicals showed declines.

Conclusion

The report highlights a mixed landscape in the chemical and oil product trade, with some regions experiencing strong growth and others facing challenges due to supply constraints, production outages, and economic factors. The US methanol imports reached multi-year lows, while China's diesel exports hit record levels. Bunker prices and freight rates showed positive trends, but the chemical trade faced downward pressure due to reduced volumes and regional dynamics.