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A better week for some in the tanker markets. Nov 23 report

By • Nov 23rd, 2012 • Category: Tankers

The Coracle tanker market podcast for Nov 23, 2012 in association with Braemar-Seascope

To learn more about the tanker markets and other aspects of commercial shipping, head to www.coracleonline.com

Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Nov 23rd 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

We start this podcast with the VLCC sector in what has been a very interesting week for ship owners and their staff. The shortage of vessels in the Atlantic, coupled with genuine volume of fixing from the AG, has meant that those owners with vessels in position were able to capitalise. This was an opportunity that allowed more aggressive owners to push rates higher on each fixture, and even encouraged the most tame to at least push for last done for a change. At the same time, in the AG for the first time we have seen the market clearly start to divide; those less approved older vessels were fixed and failed, leaving an opening for well approved tonnage to charge a premium.

There has been a lot of discussion in owners’ circles about how to improve the freight market, and perhaps the recent excitement offers some hope for those desperately trying to improve tanker freights. The charterers are usually very quick to respond to excitement by withdrawing from the market, as we have seen as this week draws to a close, leaving owners with time to cool off.

With the Thanksgiving weekend, the market will be subdued in any case, so come Monday we will see how much firmness the owning fraternity will show next week. The replacements stole the show this week as charterers had to re-enter the market having fixed in the 40’s for AG/East, and having to pay well into the 50’s for the replacement vessel. The top rate so far reported was a very healthy 270 at 57.5 AG/Taiwan on a replacement . This rate was then repeated for an AG/Malacca voyage on Tuesday. Some charterers, notably not those involved in replacements, have been happy to see a little excitement in the market, but the fun never seems to last for long. AG/Far East is currently trading 270 at 52.5 for a well approved modern vessel.

AG/West has not been traded much this week as charterers refused to move above 30 for AG/USG and had fixed quite far forward for the dates over which the excitement started. West Africa was also an exciting market and W Africa/East was traded in parallel with the AG. It was poetic justice that the owners who first spotted the increasing freight rates in the Atlantic market were the ones that also managed to secure the maximum freight paid W Africa/China 260 at 52.

The 30 day availability index shows 51 VLCCs arriving at Fujairah, of which 5 are over 15 years old, compared to 40 last week. Over the first decade of December we have counted a total of 38 fixtures, hence the outlook is balanced for the moment. The bunker price of $610/tonne is the same as last week. The Ag/West rate is unchanged from last week but assessing AG/East at 52.5 gives owners a return of $31,000 a day.

Now the Suezmax sector and whilst it started quietly, the West Africa market eventually sprang into life with healthy levels of fixing. Unfortunately for owners, this never translated into healthier rates and in fact levels actually fell. The Mediterranean market was dominated by fixtures east, but after the expectation last week that increasing weather concerns might boost rates, they in fact fell for cross-Med cargoes to 62.5. In the Black Sea, straits delays remain at 4 days and the market is subject to relatively high levels of volatility. Rates have fluctuated between 57.5 and 70 (albeit on a replacement) for the UKC-Med. Owner sentiment seems to have settled somewhere around 65 with charterers looking for 60. In the North Sea, activity was sparse until midweek, when $2.75m and $2.6m to Singapore were fixed, with N Sea/trans-Atlantic fixtures at around 50.

Looking at the Aframaxes and this week in the Mediterranean has been, by and large, the same as last. A few charterers have had to pay the odd
point more here and there for a less attractive voyage or off specific dates where tonnage has been a little more tight than others, however fixing levels have mostly remained at the low levels of 80 at 75 for a routine cross-Med, and 77.5 from Ceyhan or the Black Sea. Owners are still waiting for a significant increase of enquiry, or some severe delays.

Quite a lot of volume has been fixed this week in the UKC and Baltic markets. Crude oil Baltic stems have moved in to and been mostly covered up until the first five of December. There has also been a reasonable amount of fuel oil and D.P.P. enquiry on prompter dates and that’s taken care of most of the slack in the position list. Although we’ve seen slightly more complicated or indeed prompter cargoes pay a few more points the market remains flat and will continue to do so until the fundamentals change.

For the clean markets in the East and the tight LR2 markets meant the week started with a lot of excitement and bigger numbers being shown by owners. Although gains were relatively modest, we’ve ended up with ships confirmed at 135 to Japan and on subs at 137.5, whilst rates to the West are up above $3m to the UKC. However, all the strong freights have been for 1st half December, and whilst the 2nd half of the month is by no means awash with tonnage, it does lengthen out a little and we’re already seeing ships that will fix ahead to secure their dates at levels a little below last done. LR1s have had a torrid time of it in that their fortunes have been capped by the LR2s. Rates rushed back up to meet parity with LR2s to Japan at 135, which is an anomaly and needs to see an adjustment upwards or downwards from one of the markets. Activity remains brisk and the lists do look a lot thinner. However, the West remains very moribund and these high levels will attract ballasters, which will likely subdue levels going forward.

In the West and Thanksgiving Day is here with no spike in rates to announce it. US buyers simply did not materialise post-Sandy and pre-Thanksgiving, as some had said. Gasoline inventories and post-election ‘consumer friendly’ pricing at the pump are the most likely causes of an unexciting and flat TC2 market. There was some volume fixed, and certain charterers such as Petrobras and PMI were quite busy, but the additional cargoes needed to take TC2 above 37 at 120 were absent. Paper at the beginning of the week saw TC2 slightly stronger as the market anticipated pre-US holidays cargoes.

A weakening UKC/East naphtha arbitrage has seen LR1s build-up, as well as LR2s, with LR2 owners now indicating significantly less than the last done of $2.775m off early December dates for UKC/Japan. The outlook for UKC/trans-Atlantic has to be firmer, as workable units – if you look closely enough – are not filling up the position lists. This leads us to suggest that owners are their own worst enemies here. Handy and Flexi owners on the UKC and Baltic seemed to have enjoyed the somewhat usual end of month rush as oil ‘across the rail’ for this month benefits the trader more than December pricing. Rates have picked up, and looking to the ice season, rates are expected to continue to tick up slowly through the rest of 2012.

Thanks for listening