Holidays in the Far East result in more pressure on tanker markets. Oct 5By james tweed • Oct 5th, 2012 • Category: Tankers
Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Oct 5th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.
With the week being dominated by the Far Eastern holidays, the AG market was quiet for most of the week with only a handful of fixtures taking place. The lack of activity resulted in the AG market taking a turn for the worse, with 35 being achieved a couple of times and charterers subsequently managing to better that by achieving 34. Owners must now look at the longer voyage options again due to the tight position list in the Atlantic providing better returns for ballasters from the Far East to West Africa rather than to do AG/East. The situation is looking a lot more unbalanced as early cargoes from West Africa will struggle to get a ballasting ship, and with very few Atlantic ships around this may enable owners to get a few extra points. However, on the downside for owners, by locking themselves into a ballast voyage around the Cape, this will be the final voyage they will perform this year at dismal rates. This could also lead to the vessel missing the potential of a stronger winter market, though we believe the potential winter premium is fading fast. The Chinese were busy covering some of the early cargoes from West Africa/East at numbers just below the 40 mark, setting the benchmark for the cargoes to follow. From the Indian charterers this week, IOC entered the market for their first November laycan from West Africa to WC India off 1-2 November dates. Also suffering due to the limited tonnage availability in the Atlantic, the majority of the offers were from the eastern ballasters and charterers managed to fix an Oil company relet (coming from Singapore) at $3.1m for the voyage. We expect next week to be busy in the region as the Indians look to fix their remaining stems for the first half of November.
The 30 day availability index shows 44 VLCCs, of which six are over 15 years old, compared to 50 last week. So far, the month of October has seen 78 fixtures reported, with only six for the last decade, leaving plenty to go for the end of the month. The freight rate for 280 AG/USG is 23.5, down half a point from last week and with bunkers down $11 to $636/tonne, owners’ earnings for the round trip via the Cape Laden and via the Suez in ballast is minus $16,300/day. This compares with 270 AG/SKorea at 34, down 2 and making owners minus $2,400/day.
Looking at the Suezmax sector and activity in West Africa increased towards the back end of the week, and with it the rates crept up. Kicking off at around 55 for UKC-Med, a 56 was fixed mid-week before several fixtures were done at 57.5. The position list has been whittled down reasonably well and with this comes the usual optimism. As we’ve seen in recent weeks, this doesn’t necessarily translate to actual rate movement, but with a couple of cargoes still to be covered we may well see this materialise. The Med has been relatively quiet, but supported by some Black Sea and North Sea activity there has been a small increase in rates up to 57.5 for UKC-Med. The market sentiment was clear in the Black Sea market where rates for UKC-Med rose steadily to 57.5. Straits delays are creeping up, and with the market sentiment also on the rise there will be many owners pushing for higher rates in the coming week with a few more stems to cover.
The Baltic and North Sea Aframax market has again seen a steady amount of activity however Primorsk and Ust-Luga crude stems have been fixed up until and around the 18th of the month and freight rates have come off slightly from last week’s already low levels. Charterers seem to be able to find new ways to convince owners to go very slightly lower, and 100 at 57.5 for UKC discharge in crude has now been done, and will be repeated many times over. Cross-North Sea is still being fixed at 80 at 85, which should pay an owner a better return than loading from the Baltic Sea. The problem is that with a general oversupply of spot tonnage, this move is snapped up by oil company relets and contract tonnage when they can, so it’s presently hardly ever seen on the spot market. This market continues to run along at its bottom.
In the Mediterranean and Black Sea we saw a strong start to the week, in terms of enquiry. Combined with the fact there were delays in the major discharge port of Trieste, this managed to stir owners’ hopes that the market would firm as the excess tonnage was diminishing. As a consequence, some charterers paid 80 at 77.5 for a routine cross Med voyage that had been paying 75. Despite this, demand has since noticeably dropped off, and as a result we are back to the fixing levels we know all too well: 80 at 75.
Turning to the clean markets and East of Suez LR2 rates have been lifted on the back of activity clearing out the October tonnage and a preponderance of western tonnage, which can’t or won’t compete for business from the AG. LR1s have had a much quieter time and rates are
gently drifting off. However, with the LR2 rates still climbing, the rates to Japan at least are close to clashing and the delta between the western rates is almost out to $750,000, which is much wider than usual.
The MR market in the AG has run out of a bit of steam this week. Rates held pretty flat at the start of the week but a quiet couple of days resulted in rates creeping off. TC12 has held reasonably well, with a distinct lack of Korean tonnage around for November dates.
In the West and it wasn’t the best of weeks for the North West European market, but with US scheduled refinery turn rounds having taken the edge off TC2, owners didn’t completely roll over and rates have not yet broken 37 at 130. This level returns about $8,000/day on a round
trip basis. The lack of West African enquiry has led to a continual ‘prompt on’ build of tonnage this week. The diesel back haul arbitrage has been negative all week, but Valero and other US refiners with similarly scheduled turn round in their European refineries were still moving barrels USG/trans-Atlantic, with rates establishing themselves in a range between 38 at 80 to 85. As we record this podcast, Exxon’s massive Baytown refinery was still dealing with a serious fire in its diesel hydro-treating unit (which removes sulphur content), so expect volume to be taken out of this USG/trans-Atlantic route and rates to soften accordingly.
Thanks for listening