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It’s been a long time since we reported excitement in the AG VLCC market… Tanker report Nov 9

By • Nov 9th, 2012 • Category: Tankers

The Coracle tanker market podcast for Nov 9, 2012 in association with Braemar-Seascope

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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Nov 9th 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

We start this podcast with the VLCC sector.

It has been a long time since we have been able to report on any excitement in the AG VLCC market. This week, though the market is on the move. Over the course of the week the volume of fixing has picked up, and while charterers noticed the increasing trend, many of the owners are only just realising that we’re on the move. At the beginning of the week, AG/East charterers had been able to pick off relet tonnage with ease at
265 at 35 level. More problematic were the cargoes requiring all options, but it was possible to have a selection of rates at a small premium. This volume at the beginning of the week laid the foundation for the upward trend. Most of the flexible and competitive tonnage has now been fixed, leaving the more pedantic, aggressive owners who are now making a concerted effort to force rates upwards. AG/East fixtures will soon hit 40 and there are very few owners now willing to offer all discharge options at competitive rates for November loadings.

The West Africa VLCC market has been relatively quiet, but this will change as the eastern ballasters concentrate on the AG and the local tonnage list is depleted due to the arbitrage business from the Continent and the Caribbean. West Africa to the West has not been fixed for some time due to the low Suezmax market, however to freight the route would be 260 at 42.5. West Africa/East has been steady at 260 at 39, though this looks set to increase. A number of VLCCs have been fixed for UKC/East at $3.7m with fuel oil.

The 30 day availability index shows 46 VLCCs arriving at Fujairah, of which five are over 15 years old, compared to 49 last week. So far for the month of November we have seen a total of 113 fixtures which probably means at least 15 more to cover for November loadings. The freight rate for 280 AG/USG is 25.5, up nearly 3 points and with bunkers down $15 to $598/tonne, owners earnings are minus $-8,350/day, an improvement to minus $15,000 a day last week. This compares with 270 at 37.5 AG/East which shows $7,000 a day to owners.

Now the Suezmaxes and this week began reasonably quietly with rates following on from last done at 62.5 for UKC-Med. Charterers appeared to decide, possibly in anticipation of growing sentiment following the strengthening of the Med market, that they would implement a cooling off period. With this in mind the majority of fixing was done very quietly.. The result was that even though the volumes were high, rates remained stable. The majority of fixing occurred towards the back end of the week, and rates had dropped off to 57.5 for the US Gulf. A short South Africa voyage paid the usual premium of ten points at 67.5, which slightly punctuated the doom and gloom, but realistically charterers seem to have successfully dampened expectations. There are a multiple of forces at work currently with a dearth of western VLCCs offset by a healthy list of Suezmaxes that can still make November dates. Added into the mix the Caribbean Aframax market moved up enough to start attracting natural W African ships,
which will take a few ships away. Unfortunately for owners, unless the levels of activity in W Africa and the flow of information picks up, it will be the prevalence of Suezmax tonnage that will decide the direction of the market. With earnings low and bunkers high, rates should not be able to drop any further. This means the market will continue along its current path into December.

After the market activity last week was propped up by some good levels of Black Sea fixing, the cargoes coming from Novorossiysk dried up. The December stem list isn’t due for a week or so, so it looks like the only Black Sea fixing we will see for a while will be charterers taking positions. Following the lack of momentum from the Black Sea, the cross-Med sentiment has reduced as well. Where 65 UKC-Med was achieved last week, 60 is now the going rate for cross-Med cargoes even off prompt dates. The delays in the straits remain at 3 days northbound and southbound, although owners will be hoping that we will see an increase in the bad weather in the Med to help fire the sentiment. The list in the Med remains long, even for early dates, but as we know, this time of year can spring a few surprises in terms of delays.

Looking at the Aframaxes and it was always going to be a tough task for owners in the Baltic to continue the bullish mood from last week. Following last week’s period of strong sentiment, after tonnage for 12-14 November dates from the Baltic tightened, owners failed in an attempt to stop rates softening back down towards 100 at 57.5 for Baltic/UKC. The simple fact remains that the market is still very much over-tonnaged, and with charterers covering stems in advance, there has been something of a lull this week. North Sea demand still remains low as the majority of cargoes were being covered on ‘own’ tonnage and C.O.A’s. In the Med and Black Sea, we saw rates slide back down to the low levels that we had become accustomed to over the summer months. A lack of enquiry and no prompt replacement fixing, nor big delays, has meant owners have been fighting a losing battle. The tonnage list grew, and owners quickly became resigned to the fact that the market was dropping to the bottom.

For the clean markets, whilst we’ve seen rates for LR2s move upwards this week to 75 at 110 to Japan and $2.725m from WC India to UKC, the remaining vessels, which for the first decade of December is now very few, are asking for much higher rates. It remains to be seen if they are achievable. Nonetheless, we haven’t seen tonnage this tight for some time. LR1’s in the meantime have enjoyed mixed fortunes, with rates shooting up to 140 and then almost immediately settling back down to 125.

In the West and following the aftermath of Hurricane Sandy, the USAC is slowly picking itself up and dusting itself down and getting back to some kind of normality. UKC/trans-Atlantic has played second fiddle to USG/trans-Atlantic as producers saw pipelines close and so needed other outlets for their clean products. TC3 and TC14, after much hype , are now softening. TC2 is finally starting to show some signs of life, and we have seen 125 put on subs twice for Spain/trans-Atlantic, and with Thanksgiving Holidays on 22nd November, owners are hyped on the back of possibility that we could see some pre-holiday cargoes next week. Sentiment is bullish although there is still tonnage around.

Thanks for listening