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Tanker market report podcast returns after the summer. Sadly, rates are no better though… Sept 1

By • Sep 1st, 2011 • Category: Tankers

The Coracle tanker market podcast for Sept 1st, 2011 in association with Braemar-Seascope

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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for September 1st. This report will look at the VLCC, Suezmax, Aframax and clean products markets.

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We start with the VL’s and the AG market has been very sluggish once again. Owners have been unable to achieve earnings which cover their operating expenses, however they have stopped short of actually subsiding charterers’ costs.Perhaps one day owners and shipyards will stop adding ships to an already hugely oversupplied market. The recent drop in secondhand values of VLCCs shows that the poor outlook is not simply a short-term problem, but it reaches forwards into the next five years. Recently we have seen relatively high demand figures, and the number of spot fixtures each month has increased relatively. However the crushing weight of the tonnage list means that rates will not improve significantly. West Africa has been very quiet, and not even the effects of a huge hurricane tearing up the eastern coast of the USA had any positive effect. It has been a quiet week from the Indians, with no cargoes being fixed as the charterers wait for firm stem dates from suppliers, which will be declared next week. We are assessing the W Africa/WC India market at $2.65m and W Africa/EC India at US$2.80m. The 30 day availability of VLCCs in the AG is exactly the same as last week, with 73 double hulls and 2 single hulls. So far for the month of September we have seen 64 spot cargoes fixed, leaving up to 50 for the balance of the month. Using this analysis it seems we have another month of oversupply, ignoring those vessels which are so far unidentified but may yet populate the list. The freight rate for 280 AG/US Gulf is 34, the same as last week, and with bunkers at $670 a tonne, owners returns are minus $8,800 a day, broadly unchanged from last week. This compares with 270 AG/S.Korea at 46 returning owners $2,200 a day.

Now the Suezmaxes and this week brought a flurry of activity, with several vessels being covered in the first three days. Rates remained weak with levels similar, if not slightly less, than those seen last week. A lack of VLCC fixing helped volumes, but did little to aid rates. With a surplus of tonnage in most areas, much more fixing is required to shorten tonnage lists. TD5 barely moved off 65 as one charterer managed to cover three vessels in a very short time at what became a conference rate for the week. Voyages with options managed to attract premiums for the flexibility, but even these were minimal.
Next week is expected to be very similar as dates move towards the end of the month. It has been a busier week in both the Med and the Black Sea, despite the ongoing problems in the area. The amount of available tonnage has capped rates as the majority of cargoes attracted upwards of eight offers. Shorter voyages were preferred as owners took refuge, hoping the market would improve in the short term. Stability in the aframax sector did little if anything to bolster suezmax rates. With further Black Sea enquiry expected next week, the outlook is likely to mirror the current situation as tonnage begins to build up. Continuing cargo interest for voyages west yielded a steady flow of fixtures as the week progressed and charterers look to cover their supply shortfall due to the problems in the Med.

The aframax market as a whole has been fairly uneventful this week. Rates in the North Sea and Baltic have remained as they were this time last week. With a short fixing week in the UK, things were not helped as it was another day where tonnage was allowed to build up, leaving the tonnage list inundated with prompt ships. Charterers have continued to cover Primorsk stems , but in general the Baltic has been notably quieter. Fuel activity has also been down from the last couple of weeks. In the North Sea, a small amount of fixtures have been concluded. However, overall things have been painstakingly slow for owners. The Med and Black Sea has been quiet, as most expected it would be. A lack of enquiry and a long list has meant charterers have succeeded in pushing rate levels to the “bottom”, meaning minimum earnings for owners. For Black Sea and Ceyhan cargoes, charterers are paying 80 at 90. For a standard cross-Med voyage, charterers are paying in the region of 80 at 85. With a long list and limited enquiry, the outlook looks very flat. In the Caribbean, rates have continued to soften, mainly due to the market being over-tonnaged, coupled with low demand. Hurricane Irene didn’t have an impact in the US Gulf or Caribbean markets. There are however some tropical storms which may cause some slight disturbances, in addition to northerly winds and these cause some draft issues in the ports, which should take out some tonnage.

Now the clean markets and in the East there was anticipation that LR1s would struggle to hold on to their recent gains. Tonnage lists look a little more sparse, but a lack of activity and an underlying lack of confidence means owners are quick to run for cover at the first sign of a slowdown in activity. LR2s remain steady. With a bank holiday in London this week, and another in Singapore next week, it’s not surprising that activity has slowed down. In the West the market on the Continent has slipped into the abyss. Rates from the Cont for TC2 are now reaching levels whereby it is becoming virtually pointless to run the numbers on a round voyage basis… With bunkers now at $650 a tonne in Rotterdam, daily returns are $1,400/day on a round voyage. This shows a voyage surplus of $34,800. Consequently, there is a considerable risk in putting a ship to sea with cargo on board versus an absolutely negligible commercial reward. Despite this, ships continue to get fixed, with the only explanation being that owners are counting on the back haul to drag the returns up into an area where opex at least is covered. The only hope at the moment is that once the prompt tonnage has been cleared out, there will be a collective will to try and force rates up. However, based on what has happened in the past, this might just be misplaced optimism. Hurricane Irene has had an exclusively negative impact on the shipping markets in the Caribbean, as power outages on the US eastern seaboard have offset any reduction in refining capacity. This has led to some nervous owners undercutting what was considered to be a reasonably strong market, according to the majority of market watchers stateside. Back haul is now on subs at 38 at 110… The reasons for this are slightly hard to fathom, but lack of experience and market presence have been suggested as contributory factors.

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