42 VLCC fixtures over the last 5 days as a wall of oil heads West spells some improvement for owners.By james tweed • Mar 29th, 2012 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for March 29th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.
We start with the VLCC sector and with the large volume of oil covered for western destinations over the past 10 days, owners are keen to maximise on this increase and push sentiment further. With Saudi Arabia increasing its output as the US stocks pile up, the spike in rates continues. Last week, we saw the older ladies along with the newbuilds offer discounted rates in order to attract employment. These were quickly snapped up which left a handful of owners with experience and large fleets to add pressure on charterers and move rates upwards. We are now well into the second decade of April stems, with 33 cargoes covered and a further 10 expected, of which 8 are working firm. The Chinese have run the gauntlet by entering for the last decade of April whilst the Thais got caught short waiting until the last minute to fix an early cargo off the 8th of April, adding fuel to the fire and increasing owners’ confidence. The availability of tonnage in the AG – although adequate to cover the supply of cargoes expected for the month of April—is the smallest list we have seen since the beginning of this year. Charterers are now digging their heels in trying to stem the flow of increasing levels, but the recent reports of Thai oil covering Dynacom at worldscale 72 has induced renewed vigour into the owners’ sentiment.
The first half of the week in West Africa remained steady with the 60 level from last week holding strong. CPC had to look for a replacement for a cargo off 18-20 April as the tonnage they had originally fixed ran late and managed to find alternate tonnage at 67.5 which was around the same levels that they fixed at initially. With the AG market reflecting a firm sentiment and in turn reducing the number of ballasters heading to W Africa, rates in this region are also on the rise. We are assessing W Africa/China at 70.
The 30 day availability index shows 45 VLCCs arriving at Fujairah, with only 3 being over 15 years old, compared to last weeks total of 50. So far for the month of April we have seen 87 fixtures, 42 fixtures over the last 5 working days, leaving an expected 45 cargoes to follow. The freight rate for 280 AG/US Gulf is up 2 to 39, but with bunkers up $5 to $741 a tonne, owners returns are still just $5,000 a day. This compares with 270 AG/S Korea at 70 which returns owners nearly $49,000 a day.
Now we turn to the Suezmax sector and from West Africa, as anticipated the 130 at 125 rate proved to be a flash in the pan. With cargoes drying up towards the end of last week, the transition into the next decade gave charterers some breathing space while the tonnage list repopulated. A couple of latecomers took 85, and come Monday the ball was well and truly in the charterers’ court. The healthy lists soaked up the influx of chartering activity and rates continued to give, with 75 being done on numerous occasions to the US Gulf later in the week. The UK Cont-Med voyages were more sticky, as owners regarded the current state of play the bottom of a trough, anticipating (or hoping for) a rapid bounce back. Eventually 80 was reached. Impatience may have dented the capacity for those with higher expectations to be satisfied, but rates do seem to have stabilised for the moment. In similar fashion, after last week reached the heady heights of 97.5 in the Black Sea, as cargoes since dried up we saw a 12 and half point drop for UK Cont-Med voyages.
For aframax owners in the North Sea and Baltic, it has been very much a two tier market. North Sea demand has continued to be fairly stagnant, which has ultimately left the tonnage lists inundated with ships. Since this time last week, when there was still some positive sentiment in the market, rates have softened to 80 at 90. On the plus side of the market, Baltic aframax rates are on the move upwards. With the new Port of Ust-Luga now up and running and Urals exports expected to rise to 7.2 million from 5.8 million tonnes in March, this has taken a number of ships off the tonnage lists. A number of replacement fixtures have also stimulated the market. In the Mediterranean and Black Sea, enquiry significantly dropped off since all March stems have been covered. Over the last week, charterers have limited the amount of enquiry, allowing the tonnage list to significantly replenish itself and diminish all remaining hopes of a strong market ad successfully so as they managed to build up substantial downward pressure on rate levels from which owners couldn’t ignore.
We now look at the clean markets and starting East of Suez where it has been a quiet week. Although LR1s have been fixed at just over 100, the excess of tonnage, whilst much reduced, is still sufficient to keep rates subdued. Some owners are just drifting into the AG in the hope that things may start to improve and are point blank refusing to accept prevailing levels. However, others are happy to play along. Short haul business seemed to be the name of the game as gains in the MR market meant that LR1s were able to compete for cross-AG business. LR2s remains extremely subdued. Gasoil failed to move on the newbuildings and although there is currently a ship on subs to go west, it’s unlikely the rate is much above $2 million. The lack of activity to the Far East is starting to tell as the position list for north Asia liftings looks a lot tighter, with no ships fixing into the region. A prevalence of UMS stems (which are likely to end up in Singapore) is not helping matters. Perhaps this will help some small gains in that region.
In the West and it was a largely neutral week with charterers seemingly unable or unwilling to force things down further and the weight of tonnage being too great for owners to get any traction. Fixing levels on a round voyage basis are very close to operating costs, especially with bunkers still being over $700/tonne in Rotterdam. In the immediate future, there is a plethora of prompt tonnage availability into the first 5/7 days in April. Beyond that there is a hope that due to a continuing buoyant stateside market that ballasters will be all but eliminated, and in 12 to 14 days this might filter through and act as a stimulus for TC2, but there is a significant tranche of early tonnage to be cleared out before that happens.