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The VLCC market bounces back… Report Apr 27

By • Apr 27th, 2012 • Category: Tankers

The Coracle tanker market podcast for April 27, 2012 in association with Braemar-Seascope

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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for April 27th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets. Please remember, if you have any comments, please leave them on or email us at .

The VLCC market in the AG has bounced back in owners’ favour since the erosion of rates last week. The reason for this was that a few charterers felt over-confident and left cargoes until slightly too late to fix. Combined with a hefty total of 142 cargoes lifted for the previous month from the AG, this meant that charterers’ usual long list of options was cut short. In the case of the Cosmic Jewel to CPC fixed 270 at 61, there was only one contender. On the back of this fixture, charterers started to wonder if the market was about to turn and once they had all dipped their toe in “off market” so it proved to be. It is not often that charterers get spooked, but this seems to be one of those occasions and with owners circulating any cargoes they have either heard of or been quoted, there is quite a lot of excitement out there. The volatility in the market is welcome and makes life exciting for all concerned, but it also makes it difficult to make a good call; do you go with the hype or do you resist temptation? The cold hard facts seem to be that the first decade is fixed with a total of 42 fixtures, the second decade is looking lively with 18 reported fixtures, ten cargoes either reported or rumoured in the market. However, there are 38 VLCCs which can make this cancelling. So we have a standoff situation, whereby charterers feel there is enough tonnage not to panic and owners feel there is enough enquiry to push rates forwards. It remains to be seen which party will win the battle.

West Africa has been subdued, first softening, with 260 W Africa/East being rated at 55, then strengthening again with owners pushing for 65 versus charterers’ ideas of 57.5. This proves the mutual non-exclusivity of the AG and W Africa VLCC markets. There seems to be another standoff for the moment. Indian charterers also had to cope with the firm sentiment in the Atlantic, with IOC fixing tonnage at $4.4m for W Africa/WC India off 22/23 May. The rate is about $400,000 more than what the charterers were aiming for when the cargo quoted on Monday. IOC are currently in the market for W Africa/WC India 25-26 May and are countering $3.925m with no takers. We expect this cargo to go at similar if not slightly higher levels than what charterers paid for their 22/23 May stem. IOC are expected to have at least one, if not two more stems from W Africa in the 25-30 May spread, which look like being worked next week. We are assessing W Africa/WC India at $4.5m and W Africa/EC India at $4.8m.

The 30 day availability index shows 57 double hull VLCCs arriving at Fujairah, of which nine are over 15 years old, compared to last week’s total of 55. So far for the month of May 64 fixtures have been reported, however we do not expect this month to produce the 142 fixtures reported for April. The freight rate for 280 AG/US Gulf is 40, up 2 points on last week. With bunkers unchanged at $723 a tonne owners’ earnings are up to $8,500 a day for the round trip via Suez. This compares with 270 AG/S Korea at 62, up 7 points from last week and making owners’ $35,000/day.

The end to last week was a bit like a damp squib in the West African Suezmax market. No real activity with just a couple of charterers repeating the 62.5 to US Gulf that we saw a number of times last week. The early part of this week was always going to be about whether owners could hold rates at 62.5 or if the charterers could push the market even lower. There didn’t seem to be a huge appetite amongst charterers to really drive the rates hard, so the market remained relatively stagnant. Moving to next week and the strong VLCC market will only encourage owners, but it remains to be seen if they can seize the opportunity to move rates upward.
In the Mediterranean and Black Sea, the whole market was waiting for the Novorossiysk May programme to be confirmed. When the dates appeared, the programme looked relatively busy, especially as we move into the summer period. Last week, the market finished at 62.5 for Black Sea/Med and this rate carried over into this week. In fact, it was repeated a number of times as if it were a conference rate. There are rumours of strikes in France next week which, if they last for any length of time, will have the usual effect on the market/rates. Without these strikes (or if they are short-lived), the list looks long enough to support the predicted Med/Black Sea cargoes, although the increased sentiment may move rates up.

As predicted in last week’s report, Baltic Aframax rates softened further. The week started off fairly quietly, allowing rates to soften to 100 at 75. However, due to increased enquiry, as the week has progressed rates have started to creep up again ,with last done currently 100 at 80. The month of May will see 16 crude cargoes lifted from Ust-Luga, an extra seven compared to April, which equates to a rise of 113,679bpd a month (although Urals exports to NWE are to drop 100,000bpd a month). The North Sea has continued to tick over at 80 at 95 with a steady flow of demand, although still not enough to stimulate the market. In the Med and Black Sea, activity picked up at the back of the week, after a slow start. With a few replacements, this has led to rates climbing, causing charterers to fix in before the market rises any further. Off early dates, tonnage is tight: one charterer has reportedly paid 80 at 115 for a cross-Med cargo off very early dates – this is 20 points more than last week and will only serve to encourage owners building firm sentiment.

Looking at the clean markets and the MR market this week seems to have caught a second wind on the back the last two weeks’ activity. TC12 is on subs 35 at 135 off mid-month dates, with charterers still asking questions off forward dates. Activity inland around the AG has also been busy and owners are bullish in their sentiment. All this, together with a couple of enquiries west and a fixture confirmed to E Africa, has served to tighten the position list. LR2 rates have continued to stay stronger to the West, with numbers still above $2.5m to the UK Cont and Petrobras are taking ships for the Far East at levels well above last done. The draw on tonnage for business west continues to influence the eastern rates. LR1s, conversely, while seeing a lot of activity, have only seen levels remain steady both east and west after the leaps of last week. With golden week upon us, the FFA market appears to be predicting the undermining of owners’ current bullish sentiment in the eastern region.

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