Weekly podcast review of the tanker markets for March 9By james tweed • Mar 9th, 2012 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for March 9th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.
As the week draws to a close, the AG VLCC could be best described as “gently firming”. Charterers who often get their own way when demanding market rates for multi-option discharge and expecting better than last done for single discharge, have found owners not so pliant. It may be a result of the larger volumes over the last few weeks are starting to bite, combined with a large number of fixtures for AG/West. The firm oil price is reflected in the bunker price and owners are galvanised by this to continue to try to improve freight rates. The rise in the AG is more to do with an end of March rush rather than any fundamental changes however and there seems to be no demand for storage as modern, well approved, vessels are plentiful.
West Africa has gone quiet since the vast tranche of fixtures at the end of last week. Charterers have started dipping their toes in for early April cargoes and they found a slightly softer market than for end March liftings. The Indian charterers were quiet from W Africa this week as the fiscal year in India draws to a close and oil companies begin tallying their profit and loss accounts before beginning purchasing oil for the new fiscal period.
The number of VLCCs arriving at Fujairah over the next 30 days is 55 double hulls, of which 8 are over 15 years, compared to 61 last week. So far for the month of March, we have a total of 104 fixtures. If we have a repeat month like February, then we expect another 25 cargoes against 25 ships which can make the cancelling. If, however, we see a shorter month (i.e. just 10 more cargoes, as we suspect will be the case), there will be more than sufficient available ships to cover the cargoes.
The freight rate for 280 AG/US Gulf is 34, up a point from last week and with bunkers up $6 to $744 tonne, owners’ earnings are minus $4,500/day. This compares with 270 AG/S Korea at 55, up 3 points and returning owners $21,500/day.
Moving to the Suezmaxes and rates in West Africa last week looked artificially low at worldscale 70 for the US Gulf. Although there were some private fixtures done at the end of last week, the rates proved unsustainable for charterers and the market moved up to 72.5. Monday morning was unusually busy this week, with 4 fresh cargoes entering the market. The charterers all had the same idea to pick a ship off quietly at lower levels. Unfortunately for them, all it achieved was to crank up owners’ confidence and encourage them to put up their rates. The inevitable Mexican standoff developed, with everyone waiting for someone else to make the first move. When the next fixture was done, there was a 7.5 point improvement in
rates and this number was then repeated 3 or 4 times. After the peak of 82.5 was seen, the amount of cargoes left for March dates reduced considerably and there was expectation that the March program was all covered. There were a couple of straggler cargoes left for March, but owners’ momentum had been lost, and charterers started to push rates back down.
There has been slightly better news for aframax owners in the West this week, where rates have firmed. In the Baltic, ice class tonnage tightened up, notably for mid-month dates. Rates jumped 7.5 points on Tuesday to 100 at 90 when a crude cargo from the Baltic destined for UK Cont seemingly only had one ship which could make the dates. Positive sentiment remains in the market, with some charterers looking to cover advanced dates, so we could see rates firm further. In the North Sea, demand has been steady but rates have not firmed as they have done in the Baltic.
In the Mediterranean and Black Sea, fixing rates picked up sharply as a result of one charterer quoting a rather prompt cargo, meaning available tonnage was significantly limited. Combined with the fact that it was also a non-preferred cargo, this meant that candidates were further decreased. As a result, the charterer had to pay up 80 at 110 for cross-Med which was a jump in rates of more than 20 points. Following this and realising sentiment was going to pick up, charterers came into the market to cover. With owners now feeling bullish, these rates were repeated, and higher was done from the Black Sea. Enquiry has been substantial off early dates, and owners have done well in maintaining these high levels. Charterers now appear to have covered their upcoming positions and are now holding off with their later stems to allow the tonnage list to replenish itself in the hope that this will take the wind out of the owners’ sails.
Looking to the clean markets and in the East after a period of increased activity towards the end of last week, owners were hoping for a busy Monday and Tuesday to help push rates upwards. The week did start positively, with four naphtha cargoes going on subs on Monday, but unfortunately three out of the four were at rates less than last done as charterers picked off Chinese and Korean tonnage. As the week wore on, all hope of a revival was squashed by a very inactive market. Cargoes going West continue to be totally absent and enquiry into East Africa has been minimal. There were a couple of cargoes down to S Africa, but with 15 ships fighting over the stems, owners didn’t really stand a chance of getting a good number.
The list suggests that it will be more of the same next week. The market needs a monumental clear out to get things back on level terms between charterers and owners, but no one can see where it is going to come from. Despite consistent fixing activity, the excess of tonnage in the eastern region continues to subdue freight levels.
In the West and on the Continent, it has been one of those weeks where not a lot happened. TC2 has effectively gone sideways. Charterers looked to put it under pressure in the early part of the week but there was firm resistance from owners, with their minds no doubt firmly focussed by ever rising bunker prices. Although activity has been pretty muted, the list itself is not that long. With cargo liftings from the US Gulf down to East Coast & West Coast South America still active, tonnage is being taken out of the equation for long periods of time and with the list not being that long it wouldn’t take much action for rates to firm.