A salutary tale of VLCC ownership highlighted by S&P activity, and other tanker market news Jan 19By james tweed • Jan 20th, 2012 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for January 19th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.
We start with the VLCC sector and in a seemingly direct contrast to the EIA report of last week, the IEA has said that in total oil demand fell in 2011. However, both agencies agree that despite difficult market circumstances, 2012 will see an overall growth in demand. Meanwhile, it was the sale and purchase market which really highlighted the highs and lows of VLCC ownership over the last ten years. The VLCC Samho Dream 319,000 Deadweight Tonnes, built 2002 at HYUNDAI SAMHO was sold this week at auction to unconfirmed buyers. In June 2000, the vessel was contracted by Star Tankers/Korea at $71m, and in January 2004 was purchased on the water by independent Greek owners at $85.5m. Having operated her in a strong market for three years, she was then sold in July 2007 to Samho Shipping/Koreans at $137m. Following Samho’s financial collapse she has been sold in January 2012 by court auction at slightly in excess of $28m. A sorry tale indeed, but no doubt the banks have shouldered the burden for this loss without affecting their bonus pot.
Meanwhile, in the AG, the VLCC market has been spurred on. Plenty of activity has been due to the looming Chinese New Year holiday and has meant that rates have risen sharply. A couple of charterers have fixed and failed with early February laycans, which only encourages a rising market – hence AG/East today is rated 270 at 78. AG/West has been trading off mostly forward positions in mid February, meaning that there isn’t the pressure of a tight position list: however owners are being encouraged to push rates up due to the activity for eastern bound cargoes. Today, AG/US Gulf is rated 280 at 45.
West Africa has been a hive of activity to the East, with a number of factors throwing things into confusion. Disruption in Nigeria meant that the Unipec programme has changed a number of times, which has resulted in fixing and failing ships off 10-15 February dates. CPC, BPCL and IOC then threw in a few cargoes, again fixing and failing a number of ships. This has resulted in the market for W Africa/East moving from 260 at 56 (that’s on the 2012 scale) to 65 in one jump as a replacement, and then re-fixed at 68 as the replacement was once again replaced. This is wonderful stuff for shipowners with vessels in position, who have been rubbing their hands with glee. There were also 4 cargoes in the market from West Africa from Indian charterers this week. BPCL unsuccessfully lingered around all week with their cargo for 11-12 February dates, trying to get the minimal tonnage available to do their desired rate of $4.9m, and eventually they went down the suezmax route. IOC fixed three cargoes this week. We are assessing W Africa/WC India at $4.75m and $5.0m to the East Coast.
The 30 day availability index shows 42 VLCCs arriving in Fujairah, of which five are over 15 years old, compared to 55 last week. We have already seen 48 fixtures for February; January finished with a total of 126 fixtures reported.
Meanwhile, the suezmax market in West Africa finished last week with a bit of a flourish. A lot of the fixing was done on a private basis and so details were scarce. Moving into this week, it has been relatively slow in terms of fixing and this has been reflected in the rate changes. Owners managed to resist during the early part of the week, but by mid-week all sentiment had disappeared. The first decade cargoes were still attracting a lot of offers and one particular cargo received 9 offers. This only emphasised the state of the market, and rates dropped to 82.5 for a UKC-Med run, putting US Gulf discharge in the 70’s. With there being barely any fresh W Africa enquiry, owners must be hoping the next fixture doesn’t take too much extra out of the rates.
For the suezmaxes life was quiet in the Black Sea at the end of last week as charterers waited for confirmed dates from Novorossiysk. The Turkish straits delays remained lengthy at the end of last week and the beginning of this week. However, the Turkish authorities started pushing 9 ships through each day and this quickly led to a reduction of the delays (and owners’ earnings) down to approximately 7 days northbound and 4 days southbound. Some ships were finding their way through a bit quicker but this is totally dependent upon weather conditions. The effect on the suezmax Black Sea market was quite dramatic as the list grew. Rates dropped from 97.5 to 90 in the middle of the week, although there are expectations that the next Black Sea fixture will be well into the 80’s. This also had an effect on the other Mediterranean markets, with trans-Atlantic voyages fixing in the low 70’s and cross-Med voyages in the 80’s. The first decade in the Black Sea looks to be well covered and with the delays reducing, the pressure is definitely building for owners.
For aframaxes in the North Sea and Baltic this week, there has been continued strong demand following last weeks strong activity. Fortunately for owners, this week would prove far better rates wise. Charterers rushed in to the market at the start of the week in an attempt to cover end month Primorsk stems as well as end decade North Sea cargoes. This took away a number of ships from the tonnage list, including ice class tonnage. Charterers have been unwilling to take the risk of employing non-ice class tonnage which, in addition to the announcement made by the Primorsk harbour master this week that ice class tonnage is now required to call at Primorsk, increased sentiment and rates started to firm. Fuel oil activity in the Baltic has been strong, drawing away further non-ice class tonnage from the tonnage lists. At one point during the week virtually all vessels open in the Continent were on subjects, leaving charterers in an uncomfortable position.
Conversely, down in the Mediterranean and Black Sea, the weak sentiment has continued bring rate levels further down. A market quote helped highlight the weakness, receiving 10 offers and putting further pressure on fixing rates. For cross-Med voyages charterers can expect to pay around 80 at 90, depending on port costs and the quality of the tonnage. Unless we see a dramatic increase in Turkish Strait delays, it is unlikely the market will improve.
Now the clean markets and it was a week for MR owners to forget in the AG, with earnings at rock bottom. At the start of the week, there was a glimmer of hope that the offline refinery at Durban would continue to keep vessels moving long haul, but as the week wore on it was obvious these cargoes were not going to come. The prompt position is heavily loaded with tonnage, and the cargoes are few and far between. There is nowhere for owners to turn. They are forced to either sit and wait for things to improve or to run their vessels at a loss. This came as a bit of a shock as expectation for the week was high on Monday with Chinese New Year approaching.
In the West and its been a much more active week than anticipated in the Continent. Rates on TC2 jumped nearly 25 points on the week as an unexpected surge of fixing cleared out much of the tonnage left for January. An active Monday set the tone and when M.O.S.K were able to repeat last done, 37 at 150, rather than getting beaten down further: this gave a definite sense that the market had bottomed and this proved to be the case, with the next 2 ships going on subs at 155 and 157.5. Thereafter we saw 160 and then – underlining the strength of owners – rates pushed up to 175. It did look like 180 was on the cards, but a lull in activity took some of the heat out of the market, aided by a somewhat more bearish than expected set of gasoline stock figures stateside. The impetus is with the owners for now, and barring all six of the ships currently on subs failing, that momentum seems likely to be carried into next week, and the early February positions.
Thanks for listening