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Tanker shipping market report Oct 19. Too many ships remains the story…

By • Oct 22nd, 2012 • Category: Tankers

The Coracle tanker market podcast for Oct 19, 2012 in association with Braemar-Seascope

Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Oct 19th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

We start this podcast with the VLCC sector in a week in which most of the market was off to Dubai for the celebrations of the Vela party. It’s all a bit ironic when the industry is struggling at present, with owners barely making enough to cover running costs against ever increasing maintenance costs and demands from charterers, but it’s this kind of hospitality which enables Vela to charter with laden speed adjustments and minimal compensation against the increased costs of bunkers burned… Meanwhile, others in the industry were wondering whether to say RIP to OSG…

Meanwhile, the fixtures being concluded this week have been relatively steady, but with freight rates sliding. It seems that wherever there is some resistance the market holds, as it has done for the last two weeks, but then an over-aged, under-approved vessel concedes a few points giving the modern ships a scare, and soon they repeat the deal. Hence the sentiment must be regarded as soft but steady around breakeven levels, but only achievable by slow ballast speeds. AG/West has been reported recently as 280 at 21 via Suez and 23 via the Cape, reflecting the weakness of this market.

In West Africa, rates have been slowly drifting northwards due to a genuine shortage of available tonnage for early month laycans. A VLCC West Africa/Taiwan cargo fixed 260 at 40.5, which reflects a raise from last week. The lack of available tonnage in the Atlantic came to bite the Indian charterers as well this week. IOC entered for W Africa/EC India off 16-17 dates and had to cough up $3.5m for an eastern ballaster, which is
considerably higher than last done on the route. They were followed by HPCL who entered for an earlier laycan off 9-10 November for W Africa/EC India. Charterers are struggling to achieve what IOC paid as it is now too short a window for the eastern ballaster to consider.

The number of double hull VLCCs arriving in Fujairah over the next 30 days is 54, of which 5 are over 15 years old, compared to last week’s total of 56. We will soon be finished with cargoes available within October laycans and will have an overhang into November of at least 10 VLCCs. This is one of the primary reasons this market is unable to lift itself from subsistence levels into proper earnings. Even the beaches of Alang and Bangladesh are well supplied with steel for the moment, so it seems the VLCC is a generally unloved beastie for the moment.

Looking at the Suezmax sector and this week’s West Africa discharges were an eclectic mix of destinations, but sentiment was difficult to gauge with such a variety in voyages. There does however seem to be some life in the market… Cross-med cargoes were few and far between this week but there were a few Med/East cargoes, with $2.5m paid to Indonesia and $3.0m to Ningbo. There was a decent level of Med/trans-Atlantic cargoes, with rates bouncing around 52.5 for USG discharge. The Black Sea was quiet although we did see a number of fixtures, but no owner was able to push rates above 140 at 60. The on-going delays in Trieste and a slight increase in the delays through the Turkish Straits are yet to have an impact on rates. Owners will be hoping these issues continue and start to put a bit of pressure on the tonnage list.

For the Aframaxes this week the Mediterranean and Black Sea markets have been scarce. By and large the available tonnage has swamped the amount of activity. It was a very quiet start to the week, and although it picked up at the back end with more long haul voyages, this wasn’t enough to make a significant impact on the tonnage list. The Baltic and Continent Aframax markets continue in much the same vein as in previous weeks. Charterers continue to reach forward as far as they possibly can for their Baltic lifting programme in order to try to insure they achieve the many times repeated freight rate of 100 at 57.5 for UKC discharge. As we arrive at the end of October programme, and with dates already trickling into November, there was a very slight resistance from owners. Ultimately though, there is still a fundamental oversupply of tonnage – nothing has changed. There have been a few questions this week for cross-North Sea voyages, but certainly not enough to shift that market upwards from its current market level of 80 at 85.

For the clean markets East of Suez, recent gains for the bigger ships have seen Time Charter Equivalent or TCE rates reach better levels for owners and the market remains undoubtedly firm. LR2s, whilst apparently paused for breath after recent gains, are also hoping to push on for higher levels. LR1s reached 130 this week to Japan and close to $2.2m to the UKC. They have benefitted from the Americans increasingly taking more stems out of WC India. The US shortage of gasoline could prove to be the saviour that the owners have been looking for and has certainly helped as the catalyst for recent market movements. It’s hard to remember seeing the LR2 market as busy this year, with the big three grades of product all active in tandem. A number of naphtha cargoes were fixed out of the AG and a new high of 75 at 110 is on subs on three separate vessels for TC1. Jet fuel to the West has been very active also, with $2.75m being the going rate for an all bells all whistles vessel. Equally, gasoil enquiry has been active with cargoes moving to the Continent and Brazil. The market has had a huge clear out of tonnage and next week is set to pick up where it left of this week in a firmed, buoyant position.

In the west and TC2 continued to struggle with little noticeable volume being added, even with a slightly positive arbitrage. Rates are now less than 37 at 120. The outlook is grim, especially as an influx of ULSD vessels fixed back haul from USG and USAC expect to saturate the market in the first half of November. West Africa cargoes remain absent. Mediterranean rates surprised everybody this week; the prompt overhang and stern line suitable players were quickly committed on Monday, and the list suddenly tightened resulting in a 20 point jump on Tuesday when rates peaked
above 30 at 190 for East Med stern line cargoes. By Thursday we saw a further spike up to 30 at 197.5 for basic TC6 and plus 10 for stern line.

Thanks for listening