Tanker market report Oct 20By james tweed • Oct 21st, 2011 • Category: Tankers
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Thank you for downloading the tanker market report from Coracle Online and Braemar Seacope. This report looks at the VLCC, Suezmax and Aframax markets for week to October 20th.
It’s been a relatively exciting week in the VLCC world, with owners who are sitting on the tonnage remaining in the AG showing off some newfound confidence to resist rates offered from the bottom of the pond. Much like the travelling community in Essex, VLCC owners refuse to move purely at the demand of their counter-parties, the main difference of course being that VLCCs are looking for a good reason to move oil across the seas while the travellers don’t listen to reason.
AG/East is currently sitting on the fence as to which next step the market shall take. While owners are starting to be bullish, charterers have been exercising their old trick of holding back cargoes in order to wash out any still anxious owners. This technique has, however, failed to succeed as vetting issues have caused more cargoes to enter the market for replacement tonnage. There have been several reasons why this market has stayed as strong as it is, and most likely will carry on going. One is that owners with tonnage in the current fixing window have pushed for a long time for higher rates and are waiting for the weaker links to disappear. Another is the need for prompt tonnage to replace ships that can’t clear vetting. These influences, together with the small rise in bunker prices, combine to produce a pretty simple recipe for an attractive and most welcome outlook for things to come. Even AG/West moved up slightly this week as an oil company re-let failed vetting and had to be replaced at 280 x ws32.5 – although this market seems less and less influenced by rates achieved on eastbound voyages these days.
In the Atlantic Indian charterers entered the market early in the week for W Africa /WC India off 5-6 November laycan. The timing of the laycan meant eastern ballasters could not make the window, and there were only a handful of Atlantic players who could make the dates. This resulted in the charterers paying up US$3.75m for the business. Other charterers then entered yesterday for W Africa/WC India off 21-22 November, which is a much more natural laycan, and paid US$3.15m – emphasising the relatively bullish sentiment in this region. We therefore assess W Africa/WC India at US$3.15m and W Africa/EC India at $3.40m. There has been less activity on the longer W Africa/East voyages, leading charterers with barrels to move to become insecure of what rates to pay and beginning to hold back. This is an approach that might in the end force them to pay up over the ws50.0 mark, more than ws5.0 points over last done on this route.
The 30-day availability index shows 71 double hulls and one single hull arriving at Fujairah, compared to 59 doubles and one single last week. With October almost finished, the November dates are well underway, with 21 fixtures for the first decade so far. Expectations are for about another 15 cargoes for 1-10/November.
The freight rate for 280,000mt AG/US Gulf is ws32.5, ws0.5 points more than last week. With bunkers at US$659.5/tonne, US$7.5/tonne down from last week, owners’ earnings are:
Double Hull TCE: US$-10,360/day (US$-11,750/day last week) – calculated round trip laden at 14.5kts via Cape / ballast at 16kts via Suez
The freight rate for 270,000mt AG/S Korea is ws50.0, up ws7.0 points from last week, making owners’ earnings:
Double Hull TCE: US$8,700/day (US$-1,830/day last week) – calculated round trip Ras Tanura/Yosu laden at
14.5kts / ballast at 16kts
N.B. Owners can improve earnings by reducing laden/ballast speed.
It was a very quiet finish to last week in the West African suezmax market. As expected, the few quiet days that we have seen led to a change in the general market sentiment. The first few West Africa fixtures we saw this week broke through the ws100.0 barrier, and there was a consistent downward trend through the week. It was thought that the October W Africa program had finished, but there were a few straggling cargoes that came up against rates in the three figures. There was a shortage of tonnage for the early month and still cargoes left to fix. However, charterers somehow managed to push rates further down, even with owners giving a variety of options. As a result, the US Gulf rate quickly dropped to ws90.0. The drops we are seeing are certainly slower than we have seen all year, demonstrating a strong underlying confidence amongst owners, offset by the current lack of cargoes. We are yet to see a concerted amount of activity in the 5-10 window, so the market is expecting there to be good levels of activity in that period. At the time of writing there were four uncovered cargoes in the market. This should lead to the rate solidifying at the current levels,
especially with a shortening list of western VLCCs building the pressure on charterers.
The strong sentiment continued for a further week in the Black Sea as the expected reduction in delays did not materialise. There was a general consensus that the new regulations would not be following directly and the delays would immediately decrease. Of course over the weekend we saw bad weather appear in Istanbul and the Bosphorus was closed on Monday. This led to delays staying at 5/6 days northbound and southbound through the entire week. We also saw delays in a number of the Mediterranean ports due to weather and general congestion, which increased the pressure on suezmaxes. All this resulted in rates moving up to ws150.0 for Black Sea/Med at the beginning of the week. We saw the first Novorossiysk November stem covered this week (so far) and it did not seem like the easiest job for the charterers. Moving into the next week, cargoes in the 5-10 window from Novorossiysk will need to be fixing promptish vessels, which should maintain the sentiment. Generally it has been a quiet week for suezmaxes in the Med, but the confidence amongst owners is strong and it will take a considerable drop in the Turkish straits delays for this to change.
It has been a much busier week in the AG suezmax market – better than we have seen for a good while. There have been a variety of cargoes including AG/East, AG/West and AG/USWC. Combine this fact with the ships that have ballasted away to the strong western market and the charterers are looking at a thinning tonnage list. AG/West was covered again at ws55.0 (or US$1.80m on a lumpsum fixture) and an AG/Durban voyage was fixed at ws72.5. As yet, rates have not moved substantially and probably remain at ws77.5 for and AG/East voyage. Added into this is an improving AG VLCC market. This market is yet to make a significant upward step, but owners’ confidence is slowly filtering down into the suezmax market.
As we mentioned last week, if tonnage lists remained tight and demand continued, North Sea rates would move further upwards. This is exactly what has happened this week. Rates have firmed significantly, with the last done for a typical cross-North Sea voyage at 80kt x ws135.0. However, owners are now demanding more, though in reality this will partly depend on what happens in the Baltic. As one could have predicted, with Baltic stems getting covered well in advance for the past two weeks, it was inevitable the market would see replacement fixtures with ships getting delayed and running late. A replacement fixture of 100kt x ws125.0 for Primorsk/UK Cont injected firm sentiment into the market and owners were soon bullish with their ideas and talking high numbers. The market is finely balanced as we write this report, and it seems there is a stand-off, with charterers waiting to see what happens with certain ships. There is a possibility we may see further replacement fixtures and if so, we really will see the market firm. On the
other hand though, if things run according to charterers’ plans and they are able to hold off, we expect the market to correct itself back down to the ws100.0 level.
It has been a very different story in the Mediterranean and Black Sea compared to that in the North. There has been a significant drop in rates, and the only factor stopping them from falling further is the Turkish strait delays, which are currently estimated as 5-6 days both northbound and southbound. Enquiry has dramatically reduced, especially for cross-Med voyages, which have been near to non-existent. The Black Sea has been limited at best. There has been some fuel enquiry both East and West, but this has hardly satisfied the number of available ships. Some owners may
be regretting ballasting down from the North Sea, where at present the balance is a lot tighter in their favour. Last done is a reported 100kt x ws110.0 ex-Black Sea, which works out as 80kt x ws137.5 and in the Med, 80kt x ws127.5. At present, the market is softening, but any significant increases in delays in the straits could change this very quickly.
In the Caribbean, the market failed to sustain last week’s rates of 70kt x ws120.0. Activity was fairly slow, and a sufficient amount of tonnage was at charterers’ disposal. Rates have fluctuated between ws110.0 and ws115.0 throughout the week, but at the time of writing last done is currently 70kt x ws112.5. However, charterers are pushing for ws110.0 again.
It was a busy week for the aframaxes in the eastern hemisphere with physical rates rebounding to ws115.0 and ws102.5 on TD8 and TD14, respectively, whist showing further upward potential. Rising bunker prices and firming market conditions in the Indonesia region caused owners to reconsider ballasting to the AG/Red Sea area thereby inducing a shortage of tonnage and subsequent scramble from charterers to cover. A relatively stronger market in the Med and Black Sea also played a role with a owners deciding it made more sense to ballast into the Med than to remain in the East. With ample inquiry from charterers and a healthy number of units getting fixed market psychology is bullish and is expected to continue into next week.