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If your VLCC was ballasting back from Singapore. Which direction would you go? Tanker report 12 Oct

By • Oct 12th, 2012 • Category: Tankers

The Coracle tanker market podcast for Oct 12, 2012 in association with Braemar-Seascope

Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Oct 12th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

We start this podcast with the VLCC sector and it’s an interesting to think about the quandary of when your VLCC is ballasting via Singapore searching for its next employment. Do you head on a south westerly routing and set sail for West Africa? Do you head for the AG, or do you wait? Theoretically, we should start to see some seasonal increases in volumes and therefore shipping demand and rates, hence perhaps waiting is a good tactic. On the other hand, you could be waiting for a long time for significant improvement. If you head to West Africa you will probably get a better earning potential than the AG, however you will be booking your ship away for a long West Africa/China voyage while there is some potential increase in the market. Heading for the AG might be a better option right now for shipowners because although earnings are poor, a shorter AG/Eastern voyage might take just the correct amount of time to deliver the vessel into a stronger market. It might be all academic though since there seems to be a constant supply of high quality tonnage, meaning that there is always more than sufficient tonnage available. Even cargoes left to fix at the very last minute can expect to pay market levels as they smoke out multiple spot VLCCs in the AG. This week, what has been surprising is that although AG/East cargoes have remained at 265 at 37.5 levels, AG/West fixtures have been relatively depressed, remaining at 280 at 23 via the Cape and less via the Suez Canal. Rates on the whole are flat but we have seen fixtures concluded at less, especially for the AG/Eastbound voyages.

The West African market has been interesting: just when owners think they have charterers in a corner they escape by diverting their own group controlled tonnage into position. Certainly, this happened for a West Africa/China voyage which was slow to fix and was running out of options loading at the end of October. It seems that charterers continue to hold all the cards right now, so even when steam starts to build up in the market there is always a Houdini act just around the corner.

It was a quiet week from Indian charterers in the Atlantic, however an oil major did charter in tonnage at $3.5m for West Africa/WC India off 20-21 October dates. The higher rate was paid due to the promptish nature of the cargo and extremely limited tonnage available on the dates. Reliance also had to pay a bit over the market when they fixed West Africa/WC India off early November dates at $3.2m, due to the laycan being in a window where tonnage availability was tight. Essar and Reliance have begun fixing their Caribbean early November cargoes at $2.9m levels. We are assessing West Africa/WC India at $3m and West Africa/EC India at $3.25m.

The 30 day availability index shows 56 VLCCs arriving at Fujairah, of which 6 are over 15 years old. This compares to 44 last week. Natural fixing dates are now end-October/early-November, so we expect October stems to be fully covered by next week. With 98 fixtures counted so far, we can expect about 20 more, with almost twice the number ships counted for the same period. The freight rate for 280 AG/USG is 23, down half a point from last week, and with bunker prices at $650/tonne, up $13/tonne, owners’ earnings are a dismal minus $17,500/day. This compares with 270 AG/SKorea at 37 returning owners $275/day.

Now the Suezmaxes and this week the West Africa market maintained itself at 57.5 for UKC-Med and 55 for the USG, rising to 60 by the end of the week. Activity levels have been relatively healthy but the position list has soaked most of it up. The list has been thinned out for October dates, so any leftover October stems may come up against some resistance. With plenty of ships able to make early November dates, expect there to be little volatility in the market over the next couple of weeks unless we see a concerted rise in the amount of cargoes. We are starting to see a change in the weather in the northern hemisphere, and this is starting to help the sentiment in the western markets. The balance in the tonnage list in West Africa needs some help from other influencing markets, however it looks difficult for this market to go down in the near future. The Black Sea market was relatively quiet, but 140 at 60 has been generally accepted as the market level. This at least represents an improvement of 2.5 points (and five over the past two weeks). The Mediterranean was busy, but ironically was also the market that suffered a drop.

Baltic Aframaxes have seen a good level of activity this week, though owners were unable to force freight rates upwards. Primorsk and Ust-Luga stems have been well in advance now, up to as late as 27th October. It’s only a matter of time until rates do make a movement back upwards, but next week may be slightly too early for this. There has been minimal cross-North Sea activity this week; anything which has been done was covered at conference levels – i.e. 80 at 85. In the Mediterranean and Black Sea it was a slow start. Owners were waiting patiently, but demand was sparse. Fortunately for them, interest has picked up from the charterers’ side and activity has increased. However, on the whole this has evened out the general sentiment, and consequently rates have remained the same as the week before at 80 at 75 for a standard cross-Med voyage, and 77.5 from the Black Sea.

Turning to the clean markets and although the LR2s have had a quiet week we’ve seen a couple of significant fixtures: one to the East bringing levels back up above 100, and another to the West which puts another $50,000 on last done West Coast Iindia to the UKC, bringing levels up to $2.675m. Owners’ confidence remains high that they can continue this trend – or at least maintain these levels. There are a few enquires for November dates, but we should see more activity for these dates next week after the ARAMCO naphtha awards have been made. In the meantime, the LR1s have enjoyed a much busier week than possibly any other this year. Certainly, the recent drop in rates has been stopped and reversed, and although rates have only crept back up to 112.5, the remaining prompt ships are pushing hard for increased levels either inter-regional or for east or western destinations.

In the West and on the Continent for MRs, TC2 rates have softened down to 37 at 125. Some antagonists might well think less will be done soon, as enquiry is simply not there for gasoline or, more importantly, its components from the UKC. Refinery turnarounds such as Pembroke are still evident and papers’ low expectation over the next few months, with selling activity on the paper seeing October and November both being sold at 124, with November being supported on the bid afterwards. Q1 2013 was trading at $20.25/tonne. Handies on the Continent are a bit more lively, however this just seems to be mopping tonnage up rather than moving rates. PMI and Petrobras have been busy and this input has kept rates from crashing rather than gradually softening.

Thanks for listening