The weather may be hot in the UK, but how about the tanker markets? May 24By james tweed • May 24th, 2012 • Category: Tankers
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Finally the hot weather has arrived in Europe and the outlook in the parks has improved.. Unfortunately, the outlook in the AG VLCC market is very bland. Owners are trying to maintain rates at around the 270 at 55 level for AG/East but are struggling as charterers erode rates by fixing those less well approved vessels willing to show that extra bit of leg to get a fixture done. The market to the west managed to keep just above the 40 level but as the week progressed the weight of the tonnage list allowed charterers a peek at the 30s… The outlook seems to be more of the same. For the moment, less approved vessels and those coming from dry dock are always willing to give a discount, which steadily reduces any chances for the market to move back into owners’ favour for the moment. A VLCC fixture from West Africa proved that it’s not all about Suezmaxes in this area as one charterer got his calculator out and worked out that a VLCC of 260 at 60 W Africa/UK Cont-Med off early June dates is cheap enough to cover a couple of Suezmax stems at 85. Meanwhile, a couple of W Africa/East fixtures were done at 260 at 56, reflecting the weakness of the AG market. Indian charterers were fairly quiet out of W Africa this week, with only IOC covering their 3rd June stem for W Africa/WC India off 17-18 June dates. Charterers had up to 6 offers for the cargo and, despite bullish sentiment from owners, they covered the cargo at $4.55m.
The 30 day availability index shows 40 vessels arriving at Fujairah of which three are over 15 years old, compared to 60 the previous week. So far for the month of June we have seen 59 fixtures reported. The freight rate for 280 AG/US Gulf is an unchanged worldscale 39, but with bunkers down $20 to $655 a tonne, owners’ earnings have improved a couple of thousand dollars a day to just over $12,000. This compares with 270 AG/S Korea at 55.5, 2 points softer than last week and keeping returns flat at $32,000/day.
Moving to the Suezmax sector and it was a very quiet finish to last week as charterers looked to take advantage of the quiet market in West Africa. After the excitement of last week had died down they realised that the list was relatively long and that rates should start moving down. The amount of VLCCs fixed for W Africa/West voyages had taken the steam out of the Suezmax market, and it seemed that every cargo that came into the market managed to take a few points with it. This week didn’t really get going until halfway through, and rates quickly corrected down to 85 for the US Gulf. This drew out a few more cargoes and rates continued their downward spiral to around 80. We didn’t see many cargoes in the 5-10 window, and this lack of cargoes was the main culprit in helping the charterers drive rates down. Despite a decent level of fresh cargoes entering the market, tonnage remains relatively plentiful.
The North Sea Aframax market remained flat this week with activity generally quite low. The tonnage list tightened mid-week after ships were taken for Baltic cargoes, however there was not enough North Sea demand to push rates upwards. Early June stems are now being fixed in the Baltic. Over the last seven days, the Mediterranean and Black Sea markets have been well-tonnaged for the amount of enquiry that has come out – as a result, fixing levels have remained low. Charterers have consistently been fixing between 80 at 80 or 82.5 for cross-Med, depending on the quality of tonnage and cost of load port. From the Black Sea, the conference rate has been 80 at 85 and this isn’t likely to change in the coming week.
Turning to the Clean markets and the AG MR market always faced an uphill struggle this week after the previous two weeks of inactivity. On Monday morning there were 12 ships sat prompt in Fujairah and another 20 arriving before the end of the month. A few ships went on subs at ridiculous levels, which for some of the voyages would have almost run at a loss. The market seemed to be doomed and rates were being pushed further and further down by charterers. Come Tuesday morning however there was an explosion of activity and by close of play Tuesday night there were 15 ships on subs up to the 5th of June. These cargoes were mainly short haul stems in and around the region, but there were also some long hauls west and some Red Sea enquiry. This activity, coupled with a fair amount of outstanding cargo 1-10 June dates, served to stop the rot and while rates being fixed remain low, they weren’t falling any lower. The tonnage list is now much more balanced and gives owners a better chance of improving rates come next week. For now the market is low, and stable.
In the West and on the Continent a lack of a consistent arbitrage led to only modest activity this week in the trans-atlantic TC2 market. The end month surge led to a tightening of tonnage somewhat, but Continent to South America kept rates steady.