More improvements for Suezmaxes and Cont CPP. More of the same for VL’s and Afras.By james tweed • Sep 23rd, 2011 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for September 22nd. This report will look at the VLCC, Suezmax, Aframax and clean products markets.
We start with the VLCC sector and onThursday morning a Korea-bound cargo quoted for laydays towards the end of the first decade of October from AG attracted 11 offers. What more need we say? It’s clear where the balance of power lies, and our friends in Seoul did an excellent job in securing high quality tonnage at a very competitive freight rate. Those charterers looking for AG/West have found the bottom of the market and are continuing to plumb those rates – 280 at 34 has been unchanged for about six weeks now and seems to be the limit of the pain threshold that owners are willing to endure. West Africa has on the whole been steady with sensible charterers picking ships off at a distance, wary of the lack of available tonnage for earlier dates.
The 30 day availability index shows 65 double hulls and 2 single hulls compared to 57 double hull and 2 singles last week. Not a nice thought! The month of October has produced only 17 cargoes, 15 of them in the first decade, and September closed with a total of 125 cargoes, which is not an insignificant number. The freight rate for 280 AG/US Gulf is worldscale 34, the same as last week and so with bunkers down $6 to $650, owners earnings are minus $7,300 a day. This compares with 270 AG/S Korea at 44 which returns owners $1,000/day.
Now the Suezmax sector and at long last we have seen some considerable improvement in the market from West Africa. The green shoots of recovery were first seen at the end of last week, the big question being whether the level of activity and fresh cargoes would continue into this week. The ball started rolling on the back of a replacement cargo which fixed 80 for UK Cont – Med, showing a jump of 10 points. The owners then realised that the early month position was tight and that there were still a good number of cargoes to fix. By the middle of the week, four or five fixtures that were done in close succession, and owners managed to drive the rates up to 87.5 for UK Cont – Med. By the end of the week, the majority of the first decade was covered, although there were a couple of stragglers left behind who found it difficult to fix at last done levels. The list is quite obviously longer after the 10th but it remains to be seen if charterers can push ratesback down to previously seen levels. With the September Black Sea program supposedly completed last week, owners were looking to October for the next round of cargoes. What was surprising was that the first Black Sea cargo that came out was off end September dates. Consequently, the charterers met a wall of resistance amongst the owners. To add into this, by the middle of the week there were three cargoes all competing for the same ships off the early October positions. The first fixture saw rates move to 85 for UK Cont – Med, but the subsequent fixtures moved the rates back up to 95. The first decade of the Novorossiysk program looks to be covered but owner sentiment remains strong. In the short term rates should stay strong,
but there may be a slight drop as we move into the last decade and the number of available ships improves. The Med Trans-Atlantic market was also relatively busy with rates improving from 55 at the beginning of the week to 77.5 as the owners were picked up on the wave of positivity originating in W Africa and Black Sea markets.
For the Aframaxes, its been a case of more of the same for owners in the North Sea and Baltic this week. Whilst activity has been steady, rates in the North Sea have remained flat at 80 at 97.5 throughout the week. The tonnage list does look slightly tighter as the week comes to an end, but one would suspect some owners are hiding ships in an effort to change the market. In the Baltic, this week has seen charterers move to cover end/early stems from Primorsk, and even move on to later dates in order to take advantage of low rates, which are still 100 at 72.5. There has been the usual fuel oil presence in the market which is currently fixing at a 2.5 point premium to crude oil. Down in the Mediterranean and Black Sea, there has been a noticeable increase in activity which has picked a number of ships off the tonnage list, leaving the list looking tighter than it has been in recent weeks. There is still a comfortable amount of ships available for charterers, but if demand continues and with the planned Bosphorus strait closures, there is a possibility we could see a healthy firming in rates. Sentiment grew in the market this week enough for owners to push rates up 2.5 points in the Black Sea, currently 80 at 90, mainly due to the increased activity. This will have an impact on Ceyhan and typical cross-Med rates. One noticeable cargo in the market, 80,000 tonnes of crude oil loading from the Libyan port of Mellitah, has, as far as we are aware, yet to be covered. If a deal is confirmed, this will surely have a major impact on the market, not just due to the vast amount of oil Libya has – which the Med market has sorely missed in recent months – but also at what premium the owner will demand.
Now we look at the clean markets and East of Suez, LR2s have softened this week with 75,000 tonnes for AG/Japan assessed at 120. Movements AG/West command rates at around the$2.6m mark. LR1s have softened to 130. Rates to for WC India/UK Cont voyages are widely reported at around $1.9m and AG/Eeat Med is at $1.6m.
In the West and the old Chinese curse “may you live in interesting times” certainly, and finally, seemed to apply this week, as a combination of events has come together to drive the TC2 market up some 30 points on the week. At the start of the week, the position list ostensibly was still showing reasonable tonnage supply for September liftings, but closer examination told a somewhat different story. A number of the available units were last cargo palm or veg oil, putting them out of use for the majority of charterers. Still more were bringing cpp into the Continent, and due to a resurgent back haul market stateside in recent weeks, port congestion had started to become a factor. So what at face value appeared to be a continuation of the 37 at 130 market that the previous week had ended up at, by late Monday afternoon rates were heading towards 140. By Tuesday, it had punched through 140 and was on its way to 150, and by Wednesday it was at 155, where, despite reports of higher being on subs from Porvoo, it seems to have stalled. So the rise can be attributed to a fairly unusual set of events, compounded by a touch of over confidence last week, leading to stems being kept out of the market when with 20/20 hindsight they probably should have been covered. September is more than likely covered now and the stock figures released on Wednesday offered no encouragement on the trading side, showing a 3.3 million barrel build. Furthermore, tonnage supply into early October is looking long at the moment, so it’s looking unlikely that this spike this week will gain enough traction to last significantly into October. However, for all the excitement about rising rates this week, it’s worth bearing in mind that 37 at 155, even with bunkers down $15 a tonne still only shows returns of $4,600 a day for a round voyage, and this is still below opex for most owners.
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