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What effect has party week in London had on the tanker markets? Dec 7

By • Dec 7th, 2012 • Category: Tankers

The Coracle tanker market podcast for Dec 7, 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 30th 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 the great and the good of the shipping industry are gathered in London for the first week of what looks a double party week this year. There has been little Christmas cheer for ship owners and operators after another difficult year and all are hoping for an improved year 2013. Meanwhile, rumours are circulating the Christmas party scene that a large London based charterer has taken over commercial management of a struggling fleet hoping to inject some real commercial know-how, as well as a volume of cargo into the arrangement. Also being reported is the signing of four VLCC newbuildings to enter the COSCO fleet in 2014, proving China’s willingness to support her ship yards and safeguard her domestic transportation requirements.

The AG VLCC market has been subdued, with few market cargoes worked and many cargoes carried on COA, time chartered or local vessels, sapping the confidence of owners. The middle decade of December looked a bit light on fixtures until Unipec declared ten VLCCs for that period.. 84 fixtures have been reported, leaving roughly 40 in total to be fixed for December laycans, the majority of which will be in the final decade.

The 30 day availability index shows 51 VLCCs arriving at Fujairah, of which four are over 15 years old, compared to 41 last week. Bunkers are up $7 to $605/tonne, meaning that 280 AG/USG at 29 is returning owners minus $2,400 a day. 270 AG/East at 46 shows owners $20,000 a day.

For the Suezmaxes and West Africa showed a further drop at the end of last week with a single fixture being done at 52.5 for the UKC-Med. This
looked like it would not be repeatable and rates stepped up to 52.5 for the USG and 55 for the UKC-Med. There was expectation that during party week the status quo would probably be maintained, although the volumes were predicted to stay high. The market was not particularly open about the volumes of fresh enquiry being seen and consequently we actually saw the market move down. With dates stretching out towards the end of December, there do not look to be many opportunities left in 2012, but certainly any cargo up to the 20th, if there is any, will meet resistance from owners on that position. Moving into 2013, the first January dates are yet to be seen. However, with no real strength in the West and good availability of tonnage, rates should remain stable. It seems inconceivable that they could go any lower with bunker prices where they are.

Looking at the Aframaxes and usually during Christmas party week market activity tends to die down. However, there has been an ever present
volume of Baltic Aframax crude cargoes in the market from the ports of Primorsk and Ust-Luga this week, as well as a good level of fuel oil demand, which has thinned the tonnage list. Although cargoes are being fixed in advance in the last decade of the month, any cargoes previous to those dates won’t find it easy to cover at current levels. Ice restrictions are still a while off yet, but temperatures of the Gulf of Finland have started to drop and charterers are having to forward think their plan when fixing in non-ice tonnage, depending on intended load port. As of yet, ice class tonnage is not paying a premium. However, when it does, the two tier market will then come in to play.

In the Mediterranean and Black Sea, sentiment has been weak. Ships have been picked off, but little detail reported, so owners have had slim chance of picking rates from off the bottom. In the eyes of the charterers, the tonnage lists still looks healthy, although the winter weather is beginning to set in so this might delay vessels and shorten the list, giving owners a glimmer of hope for rates to push up.

Moving to the clean markets and East of Suez, despite coming into the week full of confidence, vim and vigour, the LR2s have suffered from slow chartering activity. Owners were prepared for dropping freight levels but everyone was shocked by the 118 and 117.5 that got put on subs on Wednesday. The keel evened out as owners then held out for 120 but that’s still more than a 10 point drop from last week. LR1s in the meantime are strutting and preening on the back of recent gains and a few replacement jobs that are hailing a false dawn of 155 to Japan. In reality, the level for the natural window is sub 150.

In the West cargo volume was difficult to assess as deals were concluded very privately by charterers, but what was clear was that the volume remained ineffective in clearing away prompt tonnage. TC2 moved up to a peak of 37 at 155 as a result of owners making a push.

Thanks for listening