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COSCO delay plans for 10 VLCC order at Japanese yard, but spot market rates drop again. Sep 28

By • Sep 28th, 2012 • Category: Tankers

The Coracle tanker market podcast for Sept 28, 2012 in association with Braemar-Seascope

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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Sept 28th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

There seems to be no rhyme or reason to the VLCC market sometimes. It seems to be operating in reverse; when there was less enquiry the market seemed stronger, now we have plenty of cargoes reported and rates seem to be slipping. It’s a catch-22 situation for owners right now: either fix and encourage others to keep accepting last done or less, or hold off and watch others fix as previously mentioned. At the end of last week, there was a little recovery as charterers ran out of the more competitive eastern controlled relets. However, as dates have advanced, availability has increased and rates softened. Some good news reported at the end of last week was that COSCO was delaying their ten VLCC order at Japanese involved state shipyards due to political tension with Japan. However, the delays will not affect the inevitable vast order of 30 VLCCs planned by China to control their domestic crude oil supplies.

The West African market has been quieter this week as major charterers seemed to have fulfilled their October VLCC requirements and Suezmaxes present a more competitive option comparing to co-freighting on the larger vessels.

The 30 day availability index shows 50 VLCCs, of which five are over 15 years old, compared to 43 last week. So far, the first decade of October has seen 38 fixtures reported, with 24 for the second decade, giving a total of 62 reported fixtures which is about the halfway stage of the month.

The freight rate for 280 AG/USG is 24, down 3 points from last week and with bunkers up $3 to $648 a tonne, owners’ earnings are down to minus $15,000/day. This compares with 270 at 36 for AG/SKorea, down 4 and returning owners nothing each day.

A brief look at the Suezmaxes shows it has been a pretty static week in West Africa as rates sat at around 55 for the USG and UKC-Med. The market remains as it has been for the past couple of weeks, seemingly teetering on the edge! Greater numbers of October stems seem to have been ineffectual in creating higher rates and it would appear that only prompt cargoes and those with particular requirements will provide owners with any chance to demand them. Moving into autumn, the weather and increased demand may yet make charterers work a bit harder….

For the Aframaxes and in the Mediterranean and Black Sea, the situation remains the same. Enquiry hasn’t been sufficient to satisfy the plentiful tonnage available. Consequently, rates have remained at the same levels at 80 at 75 for a Libya-load cross-Med cargo, and 77.5 from the Black Sea. The only silver lining of this week for owners is that bunkers have come off slightly, therefore having a positive effect on their returns.

The Baltic and North Sea Aframax market has seen a good amount of activity this week. Primorsk and Ust-Luga crude stems have, in the most part, been fixed up until the 10th of the month but rates have stagnated at 100 at 60 for UK Cont discharge. There has been a slight increase in activity in terms of fuel movement from the Baltic to UKC and, because these movements have been fixed on a much prompter basis, there has been a slight tightening in the tonnage list for very early month positions. That, coupled with a few delays here and there, saw freight rates for fuel
oil, albeit on the prompter position, move up to 100 at 65. In general, looking at the natural fixing window, the supply and demand factors have not changed in any way.

Turning to the clean markets and East of Suez, it has been a positive week for MR owners in the Middle East, with TC12 acting as the main driving force to push the market up. A tight tonnage list combined with a distinct lack of Korean vessels available until 3rd decade October has meant that charterers have had to call upon western and Middle Eastern controlled vessels to take their naphtha cargos to the Far East. The market firmed 20 points in 4 days, with 35 at 145 being on subs off 16-17 dates, a good three weeks forward. Elsewhere, cargoes into South Africa have been plentiful, with 35 at 190 becoming the going rate. This is a market that didn’t quite reach its potential this week, but looks in good stead to improve further come next week.

Whilst the LR2s have seen a lot of activity this week, it has had little impact on rates. With rates to Japan having been set and maintained from last week at 95, we saw a very slight uptick to 96 by the week’s end. However, given the shorter tonnage lists and activity in the Middle East region, it was an unexpectedly narrow increase.

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