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Another tough week for VLCC owners but Med players delighted by the cold weather. Tanker report Feb 10

By • Feb 10th, 2012 • Category: Tankers

The Coracle tanker market podcast for Feb 10, 2012 in association with Braemar-Seascope

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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for February 9th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.

We start with the VLCC sector at the end of a tough week for the big tanker owners. Although activity increased in the AG, this only seemed to highlight the long list of available tonnage. It is always concerning for owners when rates start to slip at this time of year since charterers are fixing an increased volume of cargoes and the summer months are only around the corner. Those final couple of voyages of the northern hemisphere’s winter are often what keeps the bank manager behind his desk rather than at the front door. High bunker prices are also preying on owners’ balance sheets, forcing some owners to slow steam their ballast legs at 10 knots. The end of February produced a number of western bound cargoes keeping rates at a solid worldscale 33 to 35 level and 32 for a straight run to the Gulf of Mexico.

The 30 day availability index shows 54 VLCCs arriving at Fujairah, including 11 which are over 15 years old, compared to 53 last week. So far for the month of February we have had 120 fixtures, which leaves approximately 5 cargoes to fix. Meanwhile, March has kicked off with 8 cargoes fixed. The freight rate for 280 AG/US Gulf is 32, the same as last week but with bunkers at $731a tonne, up $10 and now the highest since 2008, owners returns are minus $7,250 a day. This compares with a voyage 270 AG/S Korea at 47.5, down 1, and returning $10,000 a day.

The West African Suezmax market remained consistently busy this week as charterers looked to complete their February cargoes. Due to the levels of activity and the strong bunker price, owners’ resistance to fixing last done grew. By the middle of the week all owners that were willing last done levels were fixed and rates started moving upwards. A couple of quick W Africa/US Gulf fixtures pushed rates up to 75 and owners tried to take advantage of the tightness in the market. At this point, a standoff developed in the market and after a couple of days of posturing, one early cargo managed to 77.5 for the US Gulf and the whole house of cards collapsed. Owners took the view that they should try and lock in at the levels they were seeing and we saw a raft of fixtures completed at similar levels. Charterers managed to complete the majority of the February program and although the list is tight for February dates, the next round of fixing should be for March stems. In the near term, rates look like they will remain stable.

The Black Sea market remained at a bit of an impasse this week. The Turkish straits were open for the majority of the week and the delays stayed consistent at around 2 days northbound and southbound. The big news for the Med players was the horrendous weather seen at the Black Sea ports. Some of the ports experienced ice for the first time in a while, although Novorossiysk remained ice free. The high winds and large swells closed the port for berthing and this led to uncertainty for the remainder of the month as the operators switched stems around. The February program looks to be almost completed and the tonnage list is no shorter than it was this time last week. There shouldn’t be too much resistance from owners for the two remaining Black Sea cargoes and consequently rates should stay stable at 140 at 75. Moving into next week, the weather will pay an important role in deciding the direction of rates. If we see a rush of southbound ships arriving at the Bosphorus or the weather closes the straits, then sentiment should improve. Obviously, owners will be hoping for a group of cargoes to enable them to take advantage of these factors.

Turning to the clean markets and in the East the LR1 and LR2 markets continued the theme of the last few weeks, with rates slipping down slowly to 100 for the LR1s
and 85 for the LR2s, to Japan. This is much to the frustration of owners, who are refusing to play at negative returns and are finding themselves left sitting spot. After a brief display of hard talk and resistance from owners for rates to the West, we’ve ended up back at $1.7m levels for LR1s whilst LR2s saw a surprisingly high level of $2.3m to the Continent, although this reflects the higher intake of the vessel over other smaller cubed vessels in the region. Activity has been higher for back haul cargoes from S Korea into Singapore and Indonesia, but this doesn’t do much to take ships out of the region. There was more doom and gloom this week for MR owners. The AG remains a tough place to be. The prompt position remains deathly quiet, with very little cargo being quoted.

In the West and the TC2 market started the week suffering from the hangover from the drop in rates of last week. The paper market was the first to realize that there was light at the end of tunnel, with Q2 at 157.25, and February and March trading at 153.5 and 161 respectively. Optimism has been slow to materialise on BITR, but with owners asking for 155 plus, the expectation is certainly there that rates will climb.
Winter has finally arrived in the Baltic, and owners with ice class vessels are finally beginning to remember why they bought ice classed tonnage.

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