Tanker market report for IP week 2012By james tweed • Feb 26th, 2012 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for February 24th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.
This week, the great and the good of the oil business descend on London for an array of cocktail parties, meetings and marathon networking sessions to ensure crude keeps flowing and customers are satisfied. It’s IP week.. There will be much to talk about this year as alternative supplies must be found to those of sanctioned states. Europe, after imposing sanctions against Iran, has found itself being sanctioned against by Iran and Syria. As a result, it is starting to look increasingly isolated internationally as terrible scenes unfold.
The VLCC market has mostly been paused since many players are travelling and the trickle of cargoes has undermined owners’ confidence. As has been customary at these moments of impasse, a well-timed quote often gets owners’ minds focussed and hence, when Ras Tanura/S Korea quoted off 10-12 March, owners were quick to register their interest. In fact, they positively threw themselves at the business, enabling 267,500 at 52 to be achieved. This has really highlighted the real balance of power in the AG, so even when the market seems steady, certain pieces of business will attract offers.
West Africa has also been subdued after the excitement of the previous week, when earlier dates faced a tightening tonnage list and approvals were key. Last week, rates got up to 260 at 57.5 for W Africa/US Gulf and 58.5 for the East, however, as cargo dates move passed the 20th March, eastern ballasters lengthen the list of available vessels, thus relieving any market pressure. Charterers entering the market for 20-30 March dates should be able to get about 2 and half points off these levels.
The 30 day availability index shows 54 VLCCs – of which eight are over 15 years old – arriving at Fujairah, compared to 63 last week. So far the month of March, we have seen 57 cargoes fixed from the AG, but for the moment it seems that owners are unable to build on the large volume fixed for February loading dates. The freight rate for 280 AG/US Gulf is worldscale 34, up a point from last week and with bunkers up $16 a tonne to $747 (a high for the year), owners’ earnings are minus $4,800/day. This compares with 270 AG/S Korea at 52, down 2and returning owners around $16,500 a day.
Looking to the Suezmaxes and Friday of last week seemed quiet, but as it turned out there was a decent amount of sneaky activity going on. With rates dropping to 72.5, there was a general expectation that rates should stay stable, however when we moved into this week they immediately jumped to 80 for the US Gulf. IP week may well have had a negative impact in terms of activity but there did not seem to be a huge amount of enthusiasm among charterers to drive rates down. As the parties subsided, charterers worked a bit harder to drive levels down and by the middle of the week they had managed to get them down to 76 and a quarter. There was a bit of a standoff between owners and charterers after this fixture, but if the market continues to be this quiet then the rates should drop.. However, with bunkers being so costly, rates shouldn’t have too far to go. There seems to be a lack of natural W Africa ships available (i.e. ships open from the States) but there are more than enough UK Cont/Med ballasters to take up the slack. Should we see an improvement in the Med/Black Sea market, this may yet become a problem for charterers.
Last week we saw Black Sea-Med voyages fix at 90. Taking into account the delays through the straits and the tonnage list this looked a bit rich, but of course owners held onto the hope that this rate may have been repeatable. By the time the Black Sea programs for March had come out, they looked a little bit short of cargoes and the majority this week was free of fresh cargoes. When one cargo did quote, charterers quickly translated the weak sentiment into a rate drop and fixed at 82.5. This looks to be the future of the Black Sea market in the near term, unless we see a dramatic increase in suezmax activity or to the delays in the Turkish straits (currently 2 days northbound and 1 day southbound). There was a decent amount of Med/East activity this week which owners will no doubt hope will take a few ships out of the market. Unfortunately, the dates were constantly changing and cargoes were withdrawing, which led to a bit of uncertainty. In the end, one charterer fixed $3.9m to China and another $4.25m for an equivalent voyage, showing that confusion reigned.
Aframaxes in the North Sea and Baltic have been relatively quiet this week, partly due to it being IP week in London. A handful of early March Primorsk stems have been covered but there has been a noticeable lack of fuel oil activity in the Baltic. Cross-North Sea demand has been fairly flat with the majority of cargoes being fixed at the conference rate of 100 at 85.
In the Mediterranean and Black Sea there was a substantial amount of fixing – and replacement fixing – and this led to some charterers having to pay in the low 90’s for cross-Med voyages. This semi-bullish sentiment fizzled out very quickly as enquiry begun to drop off, while tonnage replenished itself.
Looking to the clean makers and it was another week to forget for MR owners in the AG. The backlog of ships is proving almost impossible to shift. We just haven’t had enough cargo to clear the area of the surplus of tonnage. With bunkers reaching almost $750/tonne at Fujairah, and with rates at an all-time low, owners are faced with a hopeless situation. WC India/Japan naphtha runs continue to pay 35 at 105, which means returns of around minus $5,000/day for the round trip.
On the Continent market activity carried on from where things left off the previous week as tonnage has been pretty much cleared out for February and things are looking very thin on the ground for early March. Another positive for owners is the relative lack of ships being failed; of the 8 TC2 MRs on subs mid week, just 1 failed. Sentiment and momentum remains firmly with owners, and it will take comparatively little in the way of activity to nudge rates up, even through the 200 mark, and this would put us in terms of earnings where the MR market finished up at Christmas. With bunkers in Rotterdam now at $707/tonne, as far as owners are concerned, it’s probably just as well.