In a week in which VLCC’s headed straight to lay up. Tanker report Sept 29By james tweed • Sep 30th, 2011 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for September 29th This report will look at the VLCC, Suezmax, Aframax and clean products markets.
We start with the VLCC market and the news that 265 at 40.5, the lowest fixture rate of the year for AG/Korea for a modern double hull VLCC, has been done. AG/West is unchanged and represents the absolute low that the current AG VLCC market is at. West Africa saw a titanic tussle as a few owners fought bravely for almost 10 days to raise the “market” for W Africa/
East. A Chinese charterer left his cargo a little too late and suddenly the world scale 42’s which had been repeated for the past 6 fixtures were no longer available. Owners ratcheted up the pressure, holding out for 50 and while charterers tried to repeat last done, their options became fewer and fewer. Eventually, forced to delay the cargo, the charterers managed to achieve 260 at 45… However, off a natural position, this rate is probably back at 42 and this sums up how difficult it is for owners to stimulate the market, even off a relatively tight position. W Africa/West saw a co-freighting deal fixed 260 at 47.5. The 30 day availability index shows 68 double hull and 2 single hull vessels, compared to 65 doubles and 2 singles last week. Owners have started to attempt to hide ships to try to reduce the number of available units but there is further bad news for owners as it seems the first decade of October fixing has been completed, with only 25 fixtures counted so far. It could be a short month… The freight rate for 280 AG/US Gulf is 34, the same as last week and with bunkers up $5 from last week to $656/tonne, owners earnings are minus $7,700/day. We calculate this return basis a round trip, laden at 14.5 knots via the Cape and ballasting back via Suez at 16 knots. For a voyage 270 AG/S Korea at 41.5, owners returns are minus $3,000/day, and this return is based on a round trip from Ras Tanura to Yosu with the laden leg at 14.5 knots and the ballast at 16 knots. Owners could therefore improve their earnings by reducing either or both of the laden and ballast speed.
Now we look at the Suezmax sector and it was a very quiet end to last week in W Africa, which was fairly predictable after the frenzy we had seen earlier in the week. Owners had a good go at maintaining sentiment into this week, but with the lack of cargoes in the market, rates dropped down to 75 for the US Gulf by the start of Monday morning. This week has actually been fairly busy for suezmaxes, but the lack of information flow has probably contributed the flatness in rates. Rates drifted down to 72.5 and although we have seen dates in the 10-15 window where the list looks tight, owners have shown no eagerness to drive rates up. The level of activity in the market has now reduced considerably, with some concern among owners that an opportunity has been missed. Moving into the second half of October the list looks slightly fatter and there is also a risk that the VLCC market will come into play, as we have seen a couple of charterers managing to put together a co-freight this week, taking two cargoes away from the suezmax market. In the Black Sea, charterers felt no pressure to put second decade cargoes into the market this week. The couple of cargoes that did appear managed to pull rates down to 82.5 for UKC-Med discharge. There was a severe lack of cross-Med cargoes to take up the slack and although we saw some Med-trans-Atlantic business, rates dropped from 77.5 down to below 70.
Now the Aframaxes and North Sea fixtures have been hard to come by this week, with very little activity in the market. For a typical cross-North Sea voyage rates remain flat, as they have done for several weeks now, at 80 at 97.5. We don’t foresee rates moving much, with activity expected to remain low and a lengthy tonnage list still at the charterers’ disposal. The majority of demand for aframaxes this week has been out of the Baltic, where the Primorsk stems have been covered at 100 at 72.5, with charterers covering in advance of the first decade in October already. There has been strong fueloil demand from the Baltic this week, but due to the volume of tonnage available owners have not been able to push rates upwards.
Down in the Mediterranean and Black Sea the level of activity has slowed down, but not before rate levels had increased. Black Sea rates peaked at 80 at 95, which, although it was for a
premium-paying load port, gave owners a reason to get bullish. However from that point onwards the hype in the market slowly disappeared as enquiry fell off. The tonnage list is now suitably long, that it is more than likely 80 at 87.5 will be paid soon. The majority of the Med has been quiet, but all the noise has surrounded events taking place in Libya. There have been a number of charterers and owners linked to Libyan export cargoes, though up until now no details have been confirmed. What is confirmed is that Libya is back online, and going to be increasingly present in the market. Having represented such a significant share of the market previously, this is surely the silver lining in a depressing week for owners.
We now move to the clean markets and East of Suez activity on the LR2s has been relatively constant, both for Jet fuel going West and naptha going East. Despite the reasonably high amount of inquiry on the LR2s, it has not been enough to move rates and so TC1 continues to be assessed at worldscale 120. It has been a relatively quiet week on the LR1s, and could be considered the weakest section across the clean market. Rates for a western discharge have been no better than $1.85m.
In the West and the Continent market built on last week’s gains with TC2 rising to 185. Predictably this has created a bullish sentiment amongst owners which charterers are currently
resisting strongly. At the moment there is a standoff and rates appear to have stalled at 37 at 180. It looks like the charterers are going to shut up shop for the week, with the aim of letting nervousness build in the market. Most of the stems out there at the moment are on fairly forward positions and don’t need to be covered until next week. There have been a couple of failures and there are new ships popping up on the Continent on a relatively prompt basis daily, all of which suggests that the balance is tipping the other way. Bar anyone getting stuck with a late running ship, or a prompt cargo outstanding, the prospect of TC2 hitting 200, which at one stage this week looked a real possibility, is currently retreating into the realms of fantasy. The market will need to see a real plethora of stems being shown early next week to avoid the hard earned gains made over the last two weeks being eroded.
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