VLCC’s providing a relatively bright spot in the tanker market.By james tweed • Nov 18th, 2011 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for November 17th. This report will look at the VLCC, Suezmax, Aframax and clean products markets.
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Starting with the big tankers and bunker prices in the AG are giving owners the excuse they need to increase their earnings while at the same time still maintaining reasonable relationships with charterers. We are coming off the back of a fruitful week of fixing, during which a rush of charterers have been looking to fix end-November stems, as well as trying to cover their early December positions. 120 cargoes have been fixed for November and already 32 for early December. Given that the December stems were only confirmed by ARAMCO on Thursday, this represents quite a lot of speculation by charterers. This increased demand, coupled with rising bunkers, has pushed rates higher and even the now legendary oversupply situation has been diminished, leaving quite a competitive market in its wake. December might prove to be a successful month for shipowners if it continues at these volumes, and owners will be praying for a Christmas bonus. Keeping this huge fleet employed in the longer term will be difficult, but demand and speculation for the moment are working in owners’ favour.
West Africa is also an area of firmness, where a shortage of tonnage – especially for earlier dates – means that rates are strong and not showing any signs of weakening. Indian activity from West Africa was limited, but activity on this route is expected to rise together with rates for cargoes in the last decade of December, as only two cargoes have been fixed by Indian charterers for December laycans so far and this is well below the usual volumes. Taking the firm sentiment prevalent in the VLCC market on all fronts, we are assessing W Africa/WC India at $4.1m and 4.3 million for the East Coast.
The 30 day availability index shows 48 double hull VLCCs at Fujairah, compared to 50 last week. If we can expect another 28-30 cargoes for the first half of the month, we still have a surplus of tonnage. However, there isn’t much room for charterers to manoeuvre… The freight rate for 280 AG/US Gulf is up 2 and half points to 42.5 and with those bunkers down $4 to $700 a tonne, owners earnings are up to $2,000/day, from minus $2,000 a day last week. This compares with 270 AG/S Korea at 62.5, up 5 and making owners’ earnings nearly $23,000/day.
Looking at the Suezmax sector and it was a fairly quiet start to the week in West Africa, with no fresh cargoes appearing on Monday. Rates drifted away to 75 with this inactivity as the tonnage list started building. By the time we had a mini-rush of cargoes in the middle of the week, any remaining sentiment amongst owners had fizzled out and rates quickly dropped to 70. This is where the market decided it wanted to stop. Even though most cargoes getting quoted received 7 to 10 offers, the robust resistance of owners led the market to stagnate. Once the market got going, however, it did actually continue at a good rate but with the overhang of tonnage coming from November, rates stayed fairly consistent. There is still a decent level of slack that needs to be taken up in the list before we see rate rises. Bunker prices are certainly underpinning owners’ resistance. There is a lack of natural West Africa VLCCs on the list, which may have an impact on the Suezmaxes, although this is more likely to be in the second decade. Should charterers end up being pushed down the Suezmax route, there is hope among the owning community that it will lead to a jump in market confidence. Next week is Thanksgiving, which may yet lead to a pre-holiday rush before the long weekend.
The Med and Black Sea markets followed a very similar path to West Africa this week.
It has also been a fairly uneventful week in the North Sea and Baltic for the Aframaxes. Only a handful of cross-North Sea fixtures were concluded, leaving the tonnage list growing by the day. Rates have remained unchanged since this time last week. In the Baltic, November stems have now all but been covered, leaving a bleak outlook for owners in the North Sea and Baltic.
The Mediterranean and Black Sea saw a substantial amount of enquiry at the beginning of this week and despite counting over 15 prompt ships on the tonnage list at one point, the demand was significant enough to see fixing levels rise but with such a deep tonnage list, it won’t take much for the positive sentiment to be reversed.
Now the clean markets and East of Suez the LR2 activity has picked up a little as December stems start to get picked off by the Korean and Japanese companies. Rates are stuck firmly at the bottom though. The opening of the gasoil arbitrage from east to west has seen some ships taken to move oil in that direction, which may be a useful clearout of tonnage. With newbuildings all but gone now until the New Year, it may at last be a chance for the coated ships to fix. The lack of activity on naphtha from the Middle East has created a tight tonnage list for ships in the North Asia region. In the West and on the Continent it has been a surprisingly lacklustre and directionless week. Any expectations of a pre-Thanksgiving upturn have proved to be utterly unfounded on both sides of the Atlantic. As a result, even though the pool of available tonnage is smaller than it has been in recent weeks, activity has been commensurately lower as well, with all too predictable results.
Thanks for listening