Tanker report Aug 18By james tweed • Aug 21st, 2011 • Category: Tankers
* DUE TO HOLIDAYS, AUDIO WILL RETURN ON SEPT 1 *
Thank you for downloading the tanker market report from Coracle Online and Braemar Seascope for August 18th 2011. This report will look at the VLCC, Suezmax, Aframax and clean products sectors.
We start with the big ships and the VLCC market continues to bottom-feed with very little change over the past 7 days. The press increasingly quotes shipping management as saying they won’t fix their prized assets at current rate levels, and then, moments later, those very vessels are reported fixed in the market at reduced levels. All this only serves to enhance the importance of cash flow. For most cargoes there are several ships that are be willing to discount last done rates – often (the excuse is given) to get to a scheduled dry dock or to gain major approvals.
AG/East rates softened further at the start of this week due to increased competition to find employment as the August stems came to a close and early September stems were introduced. Towards the end of this week, after the cheaper tonnage had been cleared out, we began to see a small increase in resistance from owners and rates move slightly in the upward direction.
The Atlantic markets started out slow, but cargo volume increased as the week progressed. Chinese charterers have pushed rates down into the low 40’s from West Africa and rates have now settled within that sector. The flexibility charterers have with the option of both suezmax and VLCC tonnage has capped rates at the low levels being achieved today.
The lack of cargoes from the Indian charterers from W Africa continued this week with only the one cargo being fixed off 16-17 August laycan for East Coast India discharge at $2.8m, which continues to reflect the depressed state of the VLCC market. On average Indian charterers end up taking about 13-15 VLCCs a month from the Atlantic, and this lack of activity from their side is not helping the already over-populated tonnage list.
The 30 day availability index shows 64 double hulls and 2 single hull VLCCs arriving at Fujairah, compared with 62 doubles and 2 singles last week. August stems have now come to an end and the month produced 112 spot fixtures. September fixtures started this week and have so far yielded 9 fixtures.
With the freight rate for 280 AG/US Gulf at worldscale 34 and with bunkers up $12 to $672 a tonne, owners theoretical earnings are minus $9,000 a day. This compares with 270 AG/S.Korea at 47, up 2 points from last week and making owners nearly $3,500 a day.
Now the Suezmaxes and although last week finished very quietly after the drop in rates, this week started quite briskly with a good level of fixing
from W Africa. Most of the business early this week was UK Cont-Med voyages and the rates fluctuated between 70 and 75, finally settling at about 70. This indicated that the US Gulf rate was somewhere around 65. However, with the amount of fixtures we had seen, some owners were showing some strong sentiment. Unfortunately, not all the owners were reading the same page and the next US Gulf fixture was done at 62.5. This was a
function of both the decreasing bunker price and the plump tonnage list. As we came towards the end of the week, levels of activity picked up considerably and a number of fixtures were done on Wednesday night. It looks like the majority of the first decade is now covered, but it would take a substantial rush of cargoes or a dramatic increase in bunker prices to drive rates up in the near future.
This August Black Sea program was completed this week. The last decade from Novorossiysk (and Ceyhan) was fairly busy, which led to some short-term tightness in the list. Not only did this activity stabilise the rates, they actually showed a little improvement for end of August dates. Consequently, there was a little rush to get cargoes covered, and this enhanced the sentiment in the market. It looked as though a couple of charterers would have to pay up relative to previous fixtures. However, this rate increase did not materialise in the end and the market returned to the status quo. We have started to see some early September dates from the Black Sea and again rates have stayed at the current level of around 140 at 70.0.
In terms of the Aframaxes, the North Sea has been generally quiet this week, with only a handful of cargoes being fixed for final decade stems.
The cargoes that have been fixed were fixed at 80 at 97.5, which is no real change from last week. It’s fairly safe to say that it would be difficult to visualise cross-North Sea rates dropping below this level as it would get to the point where owners would be better off not trading the cargo. In the Baltic, charterers have returned to fixing their final August Primorsk stems , after the maintenance period has now finished. The main activity in the Baltic has been fuel cargoes, which has kept the market going. Looking to next week and even though we can’t see it now, rates could soften further if tonnage levels do not correct themselves and earnings fall in to line with the North Sea.
For the second week running, the markets in the Mediterranean and Black Sea have improved from the point of view of the owners. A combination of high levels of fixing, as charterers start to cover their end-month stems; replacement cargoes and premium paying voyages have all helped to improve sentiment and push rates up. The rises in rates aren’t huge in worldscale points, but in terms of earnings the difference is significant.
We now look at the clean markets and it has been fairly quiet on the LR2s East of Suez this week, with rates, although untested, nominally flat at 75 at 125 for AG/Japan. With the Formosa refinery shutdowns in Taiwan, the gasoil arbitrage from the Far East to the West remains shut.
The LR1s, on the other hand, have had an interesting week. Rates are now up at the 55 at 145 for AG/Japan, due to a tightening list and several fresh cargoes. It remains to be seen if rates will continue to rise but with owners pushing the market up, it’s possible we’ll see higher levels fixed next week if more naphtha cargoes come into the market as expected.
The jet fuel market AG/West has been fairly quiet after several liftings last week, particularly on the LR2s. Rates are up slightly on the LR1s with $2.15 million reported to be on subs at the moment.
In the West the benchmark TC2 Trans Atlantic route may have ended up nominally higher than the start of the week, but not by much. Stock figures released on Wednesday were more bullish than anticipated, with a 3.5 million barrel draw, against an expected draw of just 2.3 million. However, this has had no impact to speak of on the physical market so far.
Thanks for listening