Shipping Podcasts finalists for Maritime Media award

Tanker market report post Posidonia. June 7

By • Jun 7th, 2012 • Category: Tankers

The Coracle tanker market podcast for June 7, 2012 in association with Braemar-Seascope

Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for June 7th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

The biennial Posidonia shipping conference in Athens was smaller this year than it has been in previous years. Some visitors had worried about security, others didn’t want the expense. As is often the case, a few subjects came up and a few collective agendas were present. “How do you see the next three to five years in the tanker sector?” was an oft raised question. The answers were varied, with some still searching for the elusive, “distressed ship”, however there are levels of distress and for the moment there have been no huge discounts given on the S&P market. “Chinese yards are promising newbuilding VLCCs delivered in 2014 which do 14knots laden at 55 tonnes a day, Koreans up at 66 tonnes a day”, which is suspicious since they will be using the same engines and generic hull designs. With quotes like “Volumes of crude oil and tonne-miles are still increasing so there is room for further fleet expansion” you could play spot the newbuilding broker!
While all this chatter has been going on, the Queen came down the Thames displaying some stiff upper lip while the rain came down. It was a long weekend to be enjoyed by everyone! Meanwhile, ominously the WTI oil price slipped again, down to $84/bbl. This had a further softening effect on bunker prices, which dipped below the $600/tonne mark at Fujairah, but has since recovered. In a strong market this would allow owners to increase their daily earnings, but sadly, in this market, this means owners are willing to give further discounts. Every point is fought over and eventually one or another owner is willing to give a slightly better discount than the last fixture reported. AG/West has been fixed as low as 280 at 32 and AG/East is under huge pressure to slip below 265 at 45. When Exxon quoted 265 AG/Singapore with loading dates 26-28 June, they couldn’t really have expected 12 offers in the low 50’s. One must question the logic of the owner that already knows 7 or 8 offers have been made for a cargo and yet throws in just one more, thereby strengthening the charterer’s position. It is hardly surprising that charterers’ ideas are 265 at 42.5, and with some patience it could well be achieved.
The West Africa market softened significantly, with W Africa/East fixed twice at 260 at 48.5 off early July dates. Once again, owners were eager to prove just who is the most charterer friendly and willing to accept his rate ideas. With the summer approaching, those less active months look dangerous for shipowners for the moment. It was a quiet week from Indian charterers in the Atlantic, with no cargoes being fixed. The stems should start rolling out next week and charterers should be able to benefit from the softening trend which is prevalent in the AG and Atlantic.
The 30 day availability index shows 56 VLCCs arriving at Fujairah, of which three are over 15 years old, compared to 58 last week. For cargoes loading within June dates, we have seen a significant second decade in which 50 cargoes contributed to the total of 113 counted so far. Sixteen fixtures have been completed for July dates already. It is difficult to predict a huge end of June rush for barrels as it seems that demand is slipping, although producers show no signs
of cutting supplies to boost the oil price.
The freight rate for 280 AG/US Gulf is down 4 points 32 and with bunker prices at $607.5/tonne, $37 lower than last week, owners’ earnings are down to just $3,000/day. This compares with 270 AG/Korea at 45, 4 points lower than last week and returning owners around $17,000/day.

Moving to the Suezmax sector and last week’s slumping West Africa market continued its downward trajectory going into Friday, and as anticipated rates
dropped to 67.5 for the US Gulf and 72.5 for the UK Cont/Med. The long weekend hiatus sustained rates at these levels, however a well-populated list meant there was little respite for those owners upon their return. However, to make life a little easier, the IFO 380 price still sits below $600/tonne out of Rotterdam which is the lowest in over a year. Rates have promptly shifted down below 70 for UK Cont-Med, with ws67.5 appearing to be representative of the market. Although several cargoes came into play over the past couple of days, they were quickly snapped up by owners wisely unwilling to gamble on the market. At present, there is a lack of cargoes and charterers have begun moving towards July dates, however there are still 20+ June vessels open in West Africa. Whether owners resist is another matter, but those considering whether or not to ballast from the Mediterranean will not be encouraged by rates there.
The Med and Black Sea markets generally followed the same course as West Africa. As with the end of last week, several owners are willing to go east and there continues to be some demand for eastern cargoes but it doesn’t look like it is consistent enough to hold up the Mediterranean market on its own.

Now the Aframaxes and as the market returned to its usual capacity after the extended weekend, the markets were either going to be extremely busy or very dull. The Posidonia hangover seemed to carry on into Wednesday, with both the North Sea and Baltic markets experiencing minimal activity. Come Thursday, enquiry levels increased and a number of ships were put on subjects, though unfortunately for owners, rates remained unchanged from last week. Unlike the North Sea and Baltic, the Mediterranean and Black Sea markets failed to see any sort of increased demand and remained lacklustre throughout the week. There have been reports of vessels loading from Ceyhan being delayed for several days, but this has failed to have any sort of impact on the market as supply continues to outweigh demand for tonnage. The cross-Med market is currently fixing in the second half of June, with Black Sea fixing up until
the 25th June, which doesn’t leave the market in good stead for the remainder of the month.

Turning to the clean markets and with such a short week due to the long Bank Holiday weekend, MR owners will be happy enough with the progress made in the past 48 hours. There has been a steady flow of prompt short haul cargoes fixing in and around the AG region. As a result, there are a good number of vessels on subs prompt up to the 15th of the month pushing cross-AG. AG/Red Sea and WC India/AG rates are up by roughly $40,000, which is a fair increase based on what was being fixed this time last week. Long haul rates have fared worse, unfortunately. Naphtha enquiry remains quiet in general and
any cargo being quoted has been quickly snapped up by Korean and Chinese tonnage, forcing rates to a last done TC12 of 35 at 119. Activity into East Africa remains quiet. There has been no westbound enquiry.

In the West and an interesting and Thursday proved an active day for northern Europe & Continent cargoes, with 15 ships going on subs as charterers piled into the market. Rates, however, have been unaffected. The sheer weight of tonnage has more than counterbalanced the amount of fixing activity seen, which has been further suppressed by more ships being shown after a few have been fixed. Tonnage is still in decent supply, with another 7 ships available, so rates are set to remain hovering at the established levels. With the prospect of more ballast ships arriving and bearish US stock figures, we will need to see activity levels at least equal to this week in order to maintain the derisory levels currently realised.