Round up of the week in tanker shipping… May 18By james tweed • May 18th, 2012 • Category: Tankers
Background to Shipping is the flexible, quick start course for anyone interested in learning about shipping… Start the course this May and save 20% using promo code back12
Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for May 18th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets and please remember, we love to get your feedback, so please leave your thoughts as a comment on ShippingPodcasts.com and for this May, if you’re thinking of doing a Background to Shipping course (http://coracleonline.com/courses/ushipping.htm) , we’re offering 20% off this month if you use promo code back12.
In the VLCC market this week owners managed to stabilise the downward movement of rates that we had seen last week. Korean charterers had fixed and failed a couple of ships for AG/S Korea, shifting the market below the 270 at 55 level. Once the weaker ships were picked off, the market has readjusted to around 55. The lack in confidence was proven earlier in the week when a late-running AG/West ship was replaced 1 and a half points lower than the original fixture. Shorter voyages have managed to secure premium rates, with 270 at 60 fixed off end May laycan for AG/WC India.
The 30 day availability index shows 60 double hull VLCCs arriving at Fujairah, of which nine are over 15 years old, compared to 61 last week. May seems to have been mostly completed, with a total of 127 reported fixtures from the AG. June has just started with 28 fixtures reported. The freight rate for 280 AG/US Gulf is 39, the same as last week and with bunkers at $675 a tonne, down $12//tonne from last week, owners’ earnings are a little weaker at $10,500/day. This compares with 270 AG/S Korea at 57.5, up 2 and a half points from last week and returning owners an improved $32,000/day.
Looking at the Suezmax sector and there seemed to be no end in sight for the charterers in the West Africa market at the end of last week as there were still some May cargoes left to cover, which helped to maintain the strong sentiment among owners. Rates had continued to move north from the 70 level we had seen in the middle of the week, and before the week was out we saw 80 fixed to Brazil. This number drew out a set of further end-month cargoes which were being hidden, and encouraged charterers to start June dates in earnest. The levels of activity remained pretty strong throughout the week and some cargoes seemed to be struggling to attract many offers, if any at all. Owners clearly had the bit between their teeth and looked to take advantage of the situation that was presenting itself. Rates rose steadily through the week as owners decided not to be too greedy and try and make large improvements – the small and regular improvements pushed rates all the way up to 100. The appearance of replacement cargoes didn’t exactly work in charterers’ favour and only enthused owners further. By the end of the week, the amount of fresh outstanding cargoes had actually reduced significantly and consequently rates softened slightly. For the first real time this year we have seen charterers co-freighting onto VLCCs going west and this may have taken the steam out of the Suezmax market.
In contrast, the Med-Black Sea market was relatively quiet. It seems that all the activity taking ships east was done last week and that the momentum was not carried through. Last week it was very much the Med-Black Sea market that was driving the western Suezmax market ; this week it was clearly West Africa doing all of the work. With the May Black Sea programme finishing last week, owners were waiting for June dates to come out so they could test where the market really was. Although we saw 98 fixed for cross-Med last week, the first Black Sea charterer to make their move managed to fix at 85. There was a slightly disappointed feel within the market and charterers decided it was a good time to reduce fresh enquiry and sit on their hands. However, this may not work out for the best in the long run as it potentially leads to a rush of cargoes next week. The list was short to begin with, but was shortened further by Med owners ballasting down to West Africa. Any charterers with fresh cargoes coming in the near future may get a surprise in regards to the length of the list, but with West Africa showing a certain amount of weakness they can probably expect to fix at similar levels in the Med.
This week has been fairly uneventful in the North Sea and Baltic Aframax markets. Rates have continued to tick over at conference rates as they have done for some time now (i.e. 100 at 75 for Baltic/UK Cont and 80 at 95 for cross North Sea). The majority of Primorsk stems have now been covered for the month of May.
Moving to the clean markets in what was an uninspiring, not to mention disastrous, week for shipowners as the LR1 and LR2 markets remain very quiet and rates continue to fall. LR2s this week broke through the 90 level and look set to continue their decline. The LR1s aren’t realistically above 110 for AG/East. Morgan Stanley finally clarified the western levels by taking a vessel on subs at below $1.9m from WC India, and with bunker prices still falling in line with oil prices, we expect further drops in rate levels to follow.
It has also been a very quiet week in the AG for MR owners. Activity has been almost non-existent, with a number of owners going back to back days without being quoted a single cargo. The prompt position is long of ships and the cargoes being worked are off end May/early June dates, leaving owners to question whether there any cargoes to fill the ten days between then and now. Rates have taken a hammering and each new fixture brings with it a new lower rate.
In the West and on the Continent, the market certainly started in a different gear than last, with frenetic activity from the start of the week and the paper bouncing up to the mid 150’s for June. Fixing has caused a definitive clear-out over the last 3 days and one might have expected rates to have hit an apex, but they have instead experienced more of a gentle incline.