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Med and Black Sea Aframaxes steal the limelight as rates jump over 100 points! Report Dec 22

By • Dec 23rd, 2011 • Category: Tankers

The Coracle tanker market podcast for Dec 22, 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 December 22nd. This report will look at the VLCC, Suezmax, Aframax and clean products markets. This will be the last tanker market report podcast until the New Year so we’d like to wish you all a very Happy Christmas.

We start with the VL’s and start by reflecting on the pressure that is being ratcheted up on Iran. Lawmakers in the USA have now decided that shipowners are to be targeted in an effort to make trading Iranian crude more difficult. It could be an effective ploy because independent shipowners now face the choice of either trading from Iran or to the USA. This will make triangulation more difficult for owners as their cargo history will be scrutinised. Chinese owners will be forced to agree to Iranian loadings as their charterers and COA partners are buying the majority of Iranian cargoes. This could effectively remove Chinese owners from the AG/US Gulf business within six months of any Iranian load and this could prove to be positive for the AG/West freight rates as those Chinese owners that have been willing to accept lower West rates, in order to capitalise on the W Africa/China back hauls, will now be forced keep their ships in the East. On the other hand, we could see more ships trapped into the AG/East trade, which could then suffer. It is a little early to tell right now, but it is a significant piece of legislation, should it be made into law on Capitol Hill. Otherwise, the market this week has been steady: owners have been able to keep rates 265 at 58 for AG/East and 280 at 36.5 for the West. The 30 day availability index shows 36 VLCCs arriving at Fujairah, only 3 of which are over 15 years old, compared to last week’s total of 46 VLCCs. This week, 35 ships have been fixed and it is this volume which has kept rates where they are today. So far for January 2012 we have seen 38 fixtures, with December proving a strong month of
140 fixtures.

Looking at the Suezmaxes and the West African market and charterers have leapt from fixing 1-5 Jan to the next two weeks as charterers try to avoid having to fix ships over the Christmas period. Owners also have an eye on the upcoming holiday and in a rearguard action from some owners ( who were pushing for 100+ in the congested period at the start of the month) are now busily offloading vessels 130 at 85 for the US Gulf. There are still healthy volumes being fixed, however as dates push passed the 15th of January, the availability of vessels increases, thus lessening pressure on rates. This volume has meant that rates have not collapsed but for the moment they are soft.
The Mediterranean market had a slow start to the week, with the majority of the market focusing on the softening W Africa market. By Tuesday the Aframax market had shifted up a gear with rates rising and this lead charterers looking at suezmax parcels, or even taking suezmaxes with part cargoes. Following shortly behind this were a handful of Med/East cargoes and the Black Sea also kicked into life. All of these factors thinned the tonnage list and breathed a breath of life into rates. One tender cargo from Novorossiysk off 8-9 Jan had multiple charterers putting ships on subs, forcing rates from 90 up to 130. These rates were very date dependant, but owners’ confidence will easily transfer into more natural fixing dates as we move into next week.
With the holiday period fast approaching, some people will find their Christmas turkey accompanied with recap and blackberry, hopefully they will have a very merry Christmas and not be looking for a replacement in a firming market.

Moving to the Aframaxes and despite the week leading up to Christmas sometimes being unpredictable, as it turned out, owners were unable to maintain the higher rates achieved in last week’s mini spike in the North Sea and Baltic. North Sea aframaxes remained steady throughout the week, however, only a handful of fixtures have been concluded. Charterers have been keen to cover as far in advance as possible and the first seven days of Januarys Primorsk stems have now all been covered, with the majority, if not all, at the conference rate of 100 at 97.5. The Mediterranean and Black Sea markets have stolen the limelight this week, with rates jumping over 100 worldscale points. This originated from Turkish strait delays increasing to 8 days northbound and southbound, coupled with a significant amount of enquiry as charterers fixed in advance to cover their positions over the festive period. This meant fixing levels gradually firmed to 80 at 140 as owners were bullish. Unfortunate for the party in question, one charterer was caught out and only had one available ship to fix, and so had to pay up a huge 80 at 230! Despite this fixture failing subjects, the business was a catalyst for even bigger rates reportedly being done for promptish cargoes, where charterers had no choice to fix: the highest of which is 80 at 244 on a part cargo basis on a suezmax. Charterers will currently struggle to fix at anything below 200 until there is a bit of calm reached in the market. For the owners, it is time to cash in while they can for an early Christmas present, as these markets can drop dramatically.

Now the clean markets and East of Suez there has been little or no LR2 activity this week. A couple of ships were taken for gasoil from North Asia down to Singapore, as the next wave of newbuilding aframaxes start to come into the market, although the arbitrage still seems to be unfavourable for moving ULSD to the West. Perhaps the New Year will bring a fresh surge of traders’ interest as traditionally there is a lull at the year’s end as they nurse their P and L. LR1s have also had a very quiet week and there is a rumour that 120 was finally breached after being under pressure for the last couple of weeks. Rates to the West have been done at around $1.825 million to the UK Cont, which again reflects a drop in levels.
In the West and it was a busy week on the Continent . As traders looked to clear their desks rates jumped to 37 at 240.

Thanks for listening