Owners of the big tankers have got the charterers right where they want them! April 6By james tweed • Apr 6th, 2012 • Category: Tankers
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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for April 6th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.
We start with the VLCC sector and the big ship owners have got the charterers right where they want them! Well some of the earlier, modern, well approved vessels have anyway; the others are mostly going about their business hoping that by the time they get to the AG, the market will still be strong. The long weekend often disrupts things in unexpected ways. It was actually last week when the pre-Easter rush came because the Chinese are also on holiday this week. So far over the last 3 days, volumes have dropped, but rates have held firm at 270 at 70 for AG/East. Meanwhile the Saudis decided that they also needed quite a volume, so AG/West has also been doing brisk business, pushing rates from a worldscale 40 level up to 45. All in all, it has been a very good week for VLCC owners. The 30 day availability index shows 40 VLCCs arriving at Fujairah, of which 8 are over 15 years old, compared to 45 last week, which was the shortest available tonnage list we had seen all year, so it seems this firmness is set to continue. The freight rate for 280 AG/US Gulf is 45 and with bunkers down a couple of dollars to $738 a tonne, earnings for the round trip via Suez are $16,500/day. This compares with 270 AG/S Korea at 71.25 and returning owners $49,000/day.
The end of last week saw the West African suezmax market quieten down and the rates drop off. The movements we have seen in the last couple of weeks have not been too dramatic and this has continued this week. With this being a short week for everyone who celebrates the upcoming holiday, there was a certain level of expectation about the market being busy and clutches of cargoes being quoted at the same time. We have not seen this in West Africa at all, with charterers gently dripping the cargoes into the market. This has of course had a negative effect on the rates as far as owners are concerned, and the few fixtures that were completed this week pushed rates down to 70 for US Gulf discharge. The major market activity has come in the Caribbean this week for suezmaxes. This may be due to charterers making up the shortfall in Iranian crude or just the fact that pricing worked for suezmaxes, however there is no doubt that the activity in that region has picked up. Should this level of excitement continue into next week, it might yet have an impact on the West Africa tonnage list. With another short week next week, owners will be patient and expect the amount of fresh cargoes to enter the market next week to be plentiful. The list still looks relatively over-tonnaged so we expect that rates will stay relatively flat.
The Baltic aframax market firmed significantly this week as a result of the port of Ust Luga adding to enquiry, and replacement fixing. This has all contributed to driving rates up, with a number of charterers having ships on subs at 100 at 115, with reports that even more has been done, but yet to be confirmed. On the back of this, the cross North Sea rate has also firmed. This week has been relatively quiet for aframaxes in the eastern hemisphere, with China on holidays for the first 3 days of the week.
Looking at clean markets and both LR1s and LR2s enjoyed some improvements to their fortune this week with a high of 115 reported to Japan on the LR1s and rates up to $1.775 million to UK Cont. LR2’s saw $2.225 million confirmed for AG to the UK Cont and 95 to Japan, however rates have slipped a little since that high. It remains to be seen if owners have got the bravado to hold out and continue this slight bull run. LR1s are in a delicate balance in that they have seen an influx of business pushing their rates up, partly driven by the bullish MR market for cross-AG. In the meantime, though, the longer term prospects remain thin and no one is talking about the holiday weekend clear out effect, which is part of the current upward rate drive.
Finally we had a positive week for MR owners in the AG. Activity, and more importantly rate increases, picked up where it left off at the end of last week. Charterers have continued to fix their naphtha cargoes forward to secure tonnage off a firm position, and in absence of any Chinese or Korean ships being available, TC12 jumped 10 points to 130. Delays in the Red Sea, Iraq and Durban continue to contribute to a tight position list, with some very uncertain, unworkable positions which have in turn tightened the market and left owners with vessels with firm itineraries bullish and expectant.
In the West and on the Continent, ships continue to get fixed, the position lists tightens and… rates continue to flatline, or even go down as owners are seemingly more concerned with coverage over the long Easter weekend, rather than analysing the position list and seeing the value in certain positions. So although the list looks very tight for the 10/14 April window – especially for full clean rather than last cargo palm or veg oil – rates are currently 37 at 140 as charterers are able to rely on nervousness winning out over bullishness.
Thanks for listening and from all of us at Coracle, have a great Easter