Shipping Podcasts finalists for Maritime Media award

Clean tanker markets haemorrhaging whilst crude demand forecasts look encouraging. Report Jan 12

By • Jan 12th, 2012 • Category: Tankers

The Coracle tanker market podcast for Jan 12, 2012 in association with Braemar-Seascope

To learn more about the tanker markets, why not take Coracle’s Tanker Chartering course?

This podcast is supported by MozyPro – – Get backed up!

Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for January 12th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.

We start with the VLCC sector and some interesting statistics from the EIA oil market forecast for the next couple of years: they predict that worldwide crude oil consumption will increase by 1.3 million barrels per day this year and by 1.5m bpd in 2013. As is predictable, the more mature economies are shrinking their demand figures while emerging economies have increased theirs. A decline in European demand outweighs modest demand growth in North America. OECD demand for 2013 is forecast to average 45.73m bpd. Non-OECD countries will account for most of the world’s oil demand growth over the forecast period with the largest gains in China, the Middle East, and Brazil. The EIA forecasts non-OECD oil consumption will climb by 1.4m bpd this year to average 43.82m bpd and by another 1.3m bpd in 2013. These are positive signs for the VLCC fleet and its owners, so long as they can control their addiction to ordering new ships!

This week, the AG has been busy with owners exerting some pressure on those charterers with more specific loading requirements. For example, an Iranian load and increased charter speed achieved 265 at 65 (on the 2011 scale) for AG/Malacca. But for longer, more standard voyages, we are still floating around 265 at 60. One always needs to keep an eye on the bunker prices: at $727 a tonne, owners are suffering a loss to earnings and this always manifests itself in the longer voyages to the western hemisphere, hence AG/US Gulf is now trading 280 at 42.5.

W Africa has been busy once again with 10m bbls fixed to the Far East on VLCCs. However, the availability of tonnage ballasting in from the eastern market has kept a lid on owners’ thoughts of increasing rates from 260 at 56 , which has been repeatedly fixed. The Indian charterers were busy this week from W Africa and with the Indian refineries coming up to full speed having completed all their maintenance schedules, we expect to see an even busier W Africa programme from them in the coming weeks.

The 30 day availability index shows 55 double hull VLCCs arriving at Fujairah with 6 over 15 years old compared to 68 last week. We are coming to the end of fixing January laycans and so far we have seen the total number of fixtures reported at 124.

Moving to the Suezaxes and it was a routinely quiet end to last week in W Africa as owners and charterers took stock of the change in rates and the early year activity. In the early part of this week there was a rush of cargoes into the market, which was music to the owners’ ears. It was clear that their New Year resolution was to make a concerted effort to drive the rates, and so they started pushing hard for this. There was a bit of a fixing frenzy and by the time the dust had settled, rates had improved to 90 for UK Cont-Med. The suezmax market was strong worldwide and this only encouraged owners to push harder. The middle of the week continued to be very active and rates continued further upwards, reaching 97.5 at its peak. Date-wise, it appears that January dates are covered (assuming that all ships get their subs). Next week we should see a run of February cargoes. Charterers are fixing approximately 2 weeks in advance. In the Med and the delays in the Turkish Straits have stayed constant at 12 days northbound and there looks to be no respite for charterers there. All of these factors combined should give owners a strong foundation for pushing rates next week.

It has been a fairly busy week for aframaxes in the Baltic, with Primorsk cargoes being covered thick and fast however rates softened as charterers piled on the pressure, fuelled by the fact that a number of ships packed the tonnage list. This time last year, the ice season in the Baltic was in full flow, however, only small parts of ice have started to form so far. We expect temperatures in the Baltic to dramatically drop by the end of January, which will of course help stimulate the market. Down in the Med and Black Sea, there was weak sentiment and rates continued to fall as these markets remain over-tonnaged.

Looking at the clean markets and East of Suez there has been very little activity this week on either LR1 or LR2s. With two LR1 ships reportedly being taken out at a shockingly low $1.7m to the UK Cont, one can only assume owners had just given up the ghost on the Middle Eastern market and bit the bullet in the hope that west bound fixing will still be as good when they finally get over there. To make matters worse, U.S.L.D arbitrages from the East to the West went in the wrong direction as well. At the start of the week there was some enquiry to lift Sikka stems into Europe, which started off with charterers having cheap ideas, and then became slightly farcical as owners – aware of the desperate straits they were in – sharpened their numbers, only to see the charterers ideas fall away from them as the trading numbers got worse.

Some February stems leaked into the market for Jet west on LR1s as charterers see the recent cheap numbers as a chance to beat owners around the head. However, the fight back is starting in earnest and some remaining ships are refusing point blank to countenance the current freight levels either East or West with bunker prices at their current levels. With the recent gains in oil prices and subsequent strengthening of bunkers, while the market gently makes the transition to new flat rates, one owner summed it up thusly “I need 2012 flat rates and 2011 Worldscale rates to make any sense of this at all”

On the smaller ships it has been one of the worst weeks for a very long time for MR owners in the AG. The market is at rock bottom, and judging by the tonnage list, plans to stay there for some time. The waters off Fujairah must resemble a car park at the moment with the prompt position stacked up with vessels looking for coverage. That being said, there has been product moving this week. The main demand for tonnage has been South Africa bound voyages due to an unplanned refinery shutdown in Durban. BP, Shell, Reliance and Mercuria, amongst others, all entered the market looking to charter in vessels, and there are reports of further cargoes still yet to be covered.

In the West and coming towards the end of the second trading week of the year, the Continent market, TC2, if not holed below the waterline is certainly haemorrhaging badly. Earnings as of today are less than 50% of what they were during the peak seen in between Christmas and New Year just 2 weeks ago. Levels have been hit by a combination of surplus tonnage and soaring bunker prices. Stock figures stateside added to the pain with a higher than anticipated build, adding to the already bearish sentiment.

Thanks for listening