60 VLCC’s arriving at Fujairah in the next 30 days and more tanker market news…By james tweed • Aug 10th, 2012 • Category: Tankers
Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Aug 10th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.
The AG VLCC market has has shown improvement in terms of Worldscale this week , but in the context of owners’ earnings, with the increasing bunker price it is difficult to see any positives. That said, according to the voyage calculator, the increase to 270 at 37.5 AG/East does at least move earnings into the positive, excluding management costs. In fact, a movement in bunker price of $24/tonne upwards has a far more devastating effect on the AG/West voyage. This is logical since far more bunkers are required, but minus $17,500/day for a round trip via Suez is the very lowest assessment we have ever seen on the calculator. Only a brave owner would venture in a westerly direction these days from the AG. Luck must be on your side to pick up the back haul on your dates from the Caribbean to China. Phileas Fogg made £20,000 for his 80 day endeavour back in Victorian times; shipowners will probably end up with about $10,000/day for 115 days on their circumnavigation.
West Africa/East has again been active with rates reaching their lowest point earlier in the week, but returning to 37.5 at time of writing. From the Indian charterers ex-West Africa, IOC entered the market for Angola/EC India off 11-12 September dates. Charterers received a fair response, with 8 offers and fixed tonnage from the US Gulf for $2.95m. The eastern ballasters were unable to compete due to the sharp increase in bunker prices negating any positive return the owners could make by ballasting to West Africa at the current rate levels. We expect the coming week to be busier from the Indian charterers, with Reliance and Essar expected to begin fixing their September programme from the Caribs. IOC are also expected to have a more active month than they did in August. We are assessing W Africa/WC India at $2.9m and W Africa/EC India at $3.2m.
The 30day availability index shows 60 VLCCs arriving at Fujairah, of which 8 are over 15 years old. This compares to last week’s total of 58 VLCCs. August has provided 95 fixtures from the AG so far, however we do expect a busier month than last, hence another 30 fixtures to come.
For the Suezmax sector, low rates out of West Africa persisted, with 57.5 repeated to UK Cont-Med a number of times, briefly peaking at 58.5 before predictably dropping back to 55. Whilst there has been activity, much of it has involved the same few cargoes failing and re-fixing vessels. This has given a slightly false impression of a market which, despite a couple of fixtures east, remains fairly dead. W Africa/WC India was done at $2.3m, but the traditional W Africa/USG and W Africa/UK Cont-Med runs seem to still be bottomed out. The W Africa positions list is still bloated and ready to absorb any potential for improved rates, and therefore it is not likely this market will be experiencing a sustained recovery anytime soon.
The Black Sea remained similarly quiet at the beginning of the week, until a couple of stems fixed and a reasonable 140 at 70 to Greece was fixed. There were a few cargoes dribbling in around the same dates but the market for UK Cont-Med stayed in the doldrums. 140 at 55 was quickly established as the market rate and this is where it stayed throughout the week. Cross-Med followed a similar path, unsurprisingly. In recent time, the last decade in the Med has been the busiest of the three, and this prediction seemed to be true this week. We saw a clutch of cross-Med cargoes enter the market and apart from one short cross-Med fixing at 65, the natural level seemed to be in the mid 50’s. The cargoes seem to have dried up towards the end of the week as charterers pushed out to the 25th from the Black Sea. There still remains a bit of slack in the Med list and it will take sustained activity to thin this out.
Now the Aframaxes and its been more of the same for the Baltic and North Sea markets this week, with rates ticking over at the same low levels as last week. Primorsk and Ust-Luga crude oil stems have been covered up until around the 23rd August, which still leaves a number of stems still to cover. Compared to recent weeks, there has been a slight increase in fuel oil enquiry for trans-Atlantic voyages which owners have been keen to jump on. Looking forward to next week, it is hard to foresee market rates changing at all and we expect it to continue to tick over as it has been.
This week in the Mediterranean and Black Sea, we have seen more activity than previous weeks. However, the amount of available tonnage has easily swallowed up this extra enquiry. Even the pipeline explosions at Ceyhan, which have since been repaired, have had little to no effect on rates. At present, charterers are comfortably paying 80 at 80 for cross-Med and 82.5 from the Black Sea.
Looking at the clean markets and East of Suez it’s been a desperately quiet week for the LR1s and LR2s. Despite an awkward looking tonnage list, there really aren’t many ships for August but we’re already seeing September cargoes, so owners are facing a long wait to lift their stems. Despite their resilience and insistence that levels will be maintained, the reality is that we’re looking at a long drop.
It has been a disappointing week for MR owners in the AG. Activity levels have been extremely low and as a result, rates have fallen quite significantly, which, when combined with the rising bunker price, means daily earnings have quickly become very poor for owners. New lows were seen on TC12 with 35 at 120 on subs WC India/Japan. Short haul rates have taken the real brunt of the inactivity, with cross-AG and AG/Red Sea business being concluded at lower and lower levels. Looking to next week and the tonnage list looks intimidating and being August, a month gripped by Ramadan and holidays, it looks like a miracle will be needed to rescue the market from the bottom.
In the West and on the Continent, the naphtha and gasoline components arbitrage has been open trans-Atlantic all week long, dampened somewhat by the overhang of last week’s Odfjell/Rotterdam tankage/storage issues, coupled with a firming crude oil price which may have taken the edge off cargo supply at the week’s end. Certainly, there were about 8 additional pure TC2 cargoes with subs in order peaking at 37 at 110 to 115 levels concluded this week, with rates higher if a West Africa option was included. Gasoil continued to work in both MR and LR1 size Baltic plus UK Cont to Red Sea-AG. We also (finally) saw more LR1 action UK Cont/West Africa as a direct result of the firming TC2 marke. Before hysteria prevails in this rising market we should remember that earnings are not close to breaking $5,000/day yet on MRs, and that’s even in combination with US Gulf/trans-Atlantic back haul.