Listen to the latest tanker market review (April 12)By james tweed • Apr 12th, 2012 • Category: Tankers
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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for April 12th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets. If you’re sitting ICS exams next week, then from all of us at Coracle, we wish you the best of luck. We hope that these podcasts have helped you keep up to date with the day-to-day markets and we’d really appreciate your feedback. Please do leave a comment on ShippingPodcasts.com or email us at firstname.lastname@example.org .
Easter appears to have taken up most of this week and prior to the break, VLCC owners were managing to form a united front holding the rates for loading in the AG above 270 at 70 for AG/East and 45 for AG/West. This time the holiday seemed to favour charterers, and since the weekend rates have fallen in both directions. It seems owners couldn’t resist the money on show and it rarely takes more than a few weaker fixtures to spook owners. Daily earnings are good for the moment on the big ships so owners should try to protect these rates, but equally charterers have taken the prolonged quiet period and not rushed into paying strong rates, hence they have started to gain the upper hand. Owners are becoming unnerved by the number of ships being hidden in the various pools, but this seems more like an excuse to accept less than last done and undercut the market. A point discount may not seem such a big deal, but when all the owners suddenly get the same idea we’ll be back at break-even levels before we know it. There was little activity for W Africa/West this week as the weak suezmax market meant that charterers have been able to pick off the smaller ships at will. W Africa/China started fixing for early May dates and at the start of the week some premium rates were being fixed, reflecting the reliance on eastern ballasters for these cargoes. But this is now softening in line with the AG. The 30 day availability index shows 53 VLCCs arriving at Fujairah, of which 7 are over 15 years old, which is 13 more than last week. We feel that the month of April is now covered with 130 fixtures being counted so far and most dates being worked are now early May coverage. The freight rate for 280 AG/US Gulf is 42.5, down 2 and a half points on last week and with bunkers down $11 to $727 owners’ earnings for the round trip via Suez are nearly $13,000 a day, down from $16,500 a day last week. This compares with 270 AG/S Korea at 66, down 5 points and returning owners $41,000/day, down from $49,000/day last week.
The end of last week was understandably quiet in the West African suezmax market with the impending holidays. This led to a very subdued finish to the week, and rates stabilised at 70 to the US Gulf. The rumours of 67.5 to the US Gulf appeared to not be true and were widely discredited. This week was also a short one, and there was an expectation that charterers would all charge in with cargoes as soon as they could. With the recent quiet period that we have seen in the suezmax market, the amount of tonnage on the list has built up. Owners held on to the hope that the market would be flooded with cargoes and any slack in the list would be taken up. Charterers had a slightly different plan and did exactly the opposite. The lack of cargoes certainly decreased the general sentiment of the owners and destroyed any sting that might have been coming. By the middle of the week the activity levels picked up a bit, but rates stayed pretty consistent. It may have come as a surprise to some that one charterer managed to fixed 70 to UK Cont-Med, which suggests that US Gulf should be cheaper. However, most owners were pretty confident that 70 to the US Gulf could continue to be achieved and this seemed to be where the market settled. The Mediterranean and Black Sea markets looked to be holding up a little stronger than West Africa. It could have been expected that that confidence would move into this week as owners knew that there were still around 5 cargoes to cover from Novorossiysk. While no one could say this was a huge amount of expected activity it should have been enough to at least hold the rates. Unfortunately, the first fixture of the week was a Black Sea-Med at 72.5 (a drop of 7.5 points). This of course set the market for the rest of the week and Charterers immediately felt a lack of need to quote cargoes and gently drip-fed cross-Med and Black Sea/Med cargoes in one by one.
Aframax markets in the North Sea and Baltic have remained stable this week. Demand has been ticking over at a good rate allowing owners to maintain their daily earnings at the current levels. However, with ice restrictions in the Baltic expected to be lifted from the 17th April onwards, there are signs that the market will start to soften and looking to next week, we expect rates to soften further, it just remains to be seen by how much. In the Mediterranean and Black Sea there was a healthy amount of fixing taking place but the long tonnage list swallowed this demand and resulted in little change to rates. Ship availability is currently well balanced and we expect rates to firm next week.
Moving to the clean markets and the LR2s in the Middle East picked up where they left off last week. With a tight position list up until the end of the month owners’ sentiment is bullish and their aim is to push the market upwards. Rates to the East for naphtha have climbed 5 points on TC1 with 97.5 being placed on subs twice, failing once but setting a new bench mark nonetheless. For jet cargoes, charterers have found themselves limited in the choice of vessels due to owner’s preference, ships positions or rates being indicated. The West market is dead, so owners seized the opportunity to push the jet western market as much as they could, pointing out that there was little incentive to end up West of the Suez. The LR1 market saw a flurry of activity with two vessels now on subs 55 at 117.5 for AG/Japan. The last decade has been particularly active and with sentiment still firm we will start to see early May cargoes being worked by charterers who are reluctant to wait and monitor how rates move.
In the West and on the Continent, it has been a somewhat confusing week where, all things being equal, the market should have risen. The list was relatively tight to start with, and has tightened further during the week, with more than one charterer fully expecting rates to rise, and yet owners seem hell bent on hitting the self-destruct button. At the time of recording, one US based owner has just covered himself in glory and taken 37 at 127.5, having failed at 132.5 whilst elsewhere 37 at 150 plus is on subs down to West Africa….. It’s not immediately clear why rates have been all over the place this week, and not as firm as fundamentals should seem to suggest they should be, but part of the explanation may be the following. There has been a large volume of gasoline put on the water down to West Africa in LR1s and LR2s in recent weeks, sucking up a huge number of what would normally have been MR parcels. This is further compounded by a large number of LR1 vessels still spot on the Continent and those rates are languishing at 60 at 100 which equates to 37 at 162, meaning that as soon as the TC2 MRs try to push the market too far charterers have the option of taking an LR at the same money but with the upside potential of 23,000 tonnes of free freight. So this combination appears to have combined to keep a lid on rates, and seems to have been compounded by owners’ seeming inability to analyse and track a position list.