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Some positive sentiment in the tanker market. Nov 3 report

By • Nov 5th, 2011 • Category: Tankers

The Coracle tanker market podcast for Nov 3rd, 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 November 3rd. This report will look at the VLCC, Suezmax, Aframax and clean products markets.

VLCC owners are lighting up the tar barrel to keep rates at operating levels for AG/East (i.e. above $10,000/day). There are signs it could be paying off, as there is some positive sentiment for cargoes sourced from the AG. It is not going up like a rocket, but an increase in demand for ships loading at the end of November has caused a little excitement. Korean charterers collected six offers for Ras Tanura/Onsan and lit a Katherine wheel under owners, igniting their shiny trousers and managing to fix 272 at 46.5. Sparklers will fly if the market can survive this blast since these fine chaps show a huge amount of flare for chartering. There are 3 to 4 AG/West cargoes reported for end month laydays, attracting offers at levels which would blow up parliament. However, looking at the tonnage list, vessels are arriving in Fujairah like an endless string of firecrackers which might put owners ideas of improvement on the bonfire. However, as we move towards the “winter market” owners will be pushing harder to get rates off the ground into a multicoloured starburst of a winter market.
In the North Sea a VLCC lit the roman candle and secured $3.9 million for Rotterdam/Singapore. This was extinguished when the fuel trade was unable to support this freight level. West Africa does not have many VLCCs in position for end-November cargoes, hence 260 at 53.5 was paid for W Africa/US Gulf. The Indians burst into the market today for W Africa/EC India of early December dates and managed to fix an eastern ballaster at $3.45m for the business, evidencing the firm sentiment that is being seen in the Atlantic. We are assessing W Africa/WC India at US3.2m and W Africa/EC India at $3.5m.
The number of crackers arriving at Fujairah stands at 66 double hulls and 1 lone single skin, she must be feeling like Guy Fawkes awaiting his fate. Last week we had 71 doubles, so there are slightly fewer this week. The real question is: will this make the difference? The freight rate for 280 AG/US Gulf is 33.5, up 1 and a half points from last week. With bunkers at $680 a tonne, up $20 from last week, owners’ earnings are minus $10,500/day. This compares with 270 AG/S Korea at 47.5, down 5 points from last week and making owners $3,500/day, down from $10,500 last week.

Now we look at the Suezmaxes and it was a relatively quiet end to last week in West Africa, which took a bit of the wind out of owners’ sails. While it looked like we may see rates step up to about 80 for a US Gulf run, charterers backed off from introducing fresh cargoes and the momentum seemed to drift away. By the time the first W Africa/US Gulf fixture was done in the middle of the week, rates had dropped to 75 for the US Gulf. Interestingly, the premium for UK Cont-Med discharge stepped up to 80, so owners’ sentiment had not completely dissipated. There was a good level of fixing through the week after this fixture, with 3 or 4 cargoes seemingly fixed every day. However, owners didn’t manage to push rates at all. Upon the completion of the middle decade of November, rates had remained stable at 75, and moving into the last decade it looks like they will remain that way. There is expectation that the last decade will see a lot of cargoes.
However, there looks to be a decent amount of tonnage carrying over to offset that. Charterers finished last week by pushing cross-Med rates down even further to 87.5 – this was a substantial drop from last done. It was a lacklustre week for Med owners, and with the lack of fresh cargoes, the list kept on building. Most fixtures seemed to fix at less than last done, with one Med/trans-Atlantic voyage even managing to break 70. There was a severe lack of Black Sea cargoes in the market this week, with only one rumoured fixture at 95. The latest cross-Med fixture was reported at 80, which suggests the next Black Sea fixture will be at similar levels. The Novorossiysk program looks to be covered up to the last decade, so owners are waiting in anticipation of the last clutch of November cargoes. Although rates appear to heading south, there is the constant risk of increased Turkish Straits delays due to bad weather and this would certainly change the dynamics of the Med market.

Looking to the Aframaxes and the North Sea and Baltic, activity has been limited and sentiment has been flat to weak. Despite some fuel enquiry, this has not had a positive effect on rates. Tonnage is in excess and so rates have come off further from last week. In the Med and Black Sea rates have continued to slide down, as the tonnage lists replenish themselves and straits delays remain consistent.

Now we turn to the clean markets and there is really nothing of any value to add this week for the LR2s. Activity has been extremely slow. Even the gasoil business from East to West has died as the arbitrage slammed shut, and the cheap newbuild aframaxes for this business are getting delayed into 2012. Some Japanese cargoes have been covered at reported rates of around 105, so we continue to bump along the bottom. LR1s have seen plenty of activity, but sadly all it has managed to do is cement the current rate levels at around 105 to Japan or $1.7m to the UK Cont, both equalling very poor returns. At the start of the week, there was a faint undertone of optimism in the MR market generated by the high levels of activity at the end of last week. The tonnage list looked much more evenly supplied, and western and Middle Eastern based owners were really looking to push rates, especially for far Eastern discharge. In reality, there just weren’t enough naphtha cargoes to push the market upwards. Instead, what we saw was an improved TC2 market in the West and prompt owners in the AG were happy to discount their rates to fix west into a perceived improved market. IN reality this turned out to be massively over-hyped and as a result, rates have stagnated to the East and dropped to the West.

Looking at the Western market a bit more and the week started off with TC2 very hyped and owners talking numbers in the high 180’s. With nothing to support it this was understandably strongly resisted by charterers. However, despite an unusually large number of cargoes in the market early in the week charterers were more than content to sit back and wait for the market to adjust in their favour. This duly happened and rates are now established at 37 at 160, and in all likelihood in the short term the market is likely to come off further as the early tonnage acts as a brake on the forward positions. Looking forward, the relative strength of the stateside markets will reduce, if not entirely eliminate ballasters from that side of the Atlantic. With tonnage bringing cargoes in to the Continent it is likely to create a premium for vessels with firm, fixable itineraries. However, for charterers this is a problem for another day, as currently rates this side of the Atlantic remain under pressure.

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