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Tanker market update from Coracle

By • Jan 21st, 2013 • Category: Tankers

The Coracle tanker market podcast for Jan 18, 2013 in association with Braemar-Seascope

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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Jan 18th 2013. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

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Starting with the VLCC market and the transition to the 2013 Worldscale rates has helped charterers reduce rates. S-oil quoted a 2-4 Feb cargo from AG to S Korea asking for offers on the new flat rates. The result was around 7 offers and a friendly owner who decided to take rates below the 40 mark. The fixture, 274 at 38.25, shows a Time charter equivalent (TCE) at around $14,000/day, which is more than $4,000/day less than others have fixed on the new flats. Nevertheless, the ship is over 15 years old and in order to find employment, a discount was offered to seduce the charterers.

Earlier in the week there was a great mix of old and new Worldscale fixing, with charterers benefiting from cargoes being drip-fed, leaving owners with a slim chance of improving rates, even with an increased volume of cargoes towards the end of this week. A few of the owners who fixed earlier this week did manage to cherry pick the cargoes of choice, especially a Scandinavian fleet that took out 3 Japanese cargoes at better numbers, thanks to the tougher restrictions at discharge ports and charterers having to take a more careful approach. With the last done now back down below an important physiological barrier, we can assume that a lot of the independent owners out there will try and maintain a firm stance on fixing, saying no thank you to sub 40 levels, leaving the eternal struggle between owners and charterers in such a poor market.

The 30 day availability index shows 61 VLCCs arriving at Fujairah, of which six are over 15 years old, compared to 62 last week. With January pretty much covered and first decade of February well on the way, we probably have another 10 to 15 cargoes in the 1-10 window to go, a large number of the 20 fixed stems done on Chinese to Chinese contracts, keeping the position lists unchanged. The pressure is surely on owners at this time to make sure they hold their heads above the water.

The bunker price is down $8 to $618/tonne and with the freight rate for 280 AG/USG being 23.75 on the 2012 scale, owners earnings, if the trip was one way would be $22,000. For the round trip via the Cape laden and back through the Canal, earning would be minus $16,000 a day.
This compares with 270 AG/SKorea at 40, down 6 points which returns owners $16,000 a day.

In the Suezmax sector this week saw the conversion from 2012 to 2013 Worldscale flat rates, which may have led to some confusion as to where rates stood. Rates in West Africa continued their depression during the week, with market levels quite firmly centred around 57.5 to the UKC-Med In the Med it was a relatively quiet start to this week as charterers took stock after the first full week of fixing. By the time that fixing started, cross-Med was being done at 70. The trans-Atlantic rates followed West Africa very closely. The Black Sea dates moved from end January firmly into February, and there was a decent level of fixing done in the first decade. The delays in the straits dropped from 5 days northbound to 3 days.

Now the clean markets and rates for both LR1s and LR2s have taken a real battering this week. Both sizes were looking pretty shaky by the end of last week, but we’ve seen a real correction of rate levels this week, with several ships now taken on the LR2 size at $2.3m AG/UKC and 75 at 80 fixed for AG/Japan. LR1s have suffered similarly, with 55 at 104 to Japan and $2.2m being assessed for AG/UKC voyages. There’s likely to be further room to fall as well; the low point of last year would equate to 88 for TC5 on 2013 flat rates. Shorter haul activity has picked up in the week, with many vessels prior to the 20th going on subs. Rates being achieved aren’t staggering, but for these prompt ships it’s more a case of killing some time to get themselves back into the next fixing window. There has not been much fresh activity, and there are still a couple of cargoes looking to cover off 25-30 dates. Charterers are probably happy to wait and see which prompt boats replenish the list before diving in. The market is still holding to fix at last done on subs.

In the West the TC2 market faltered at the end of last week as rates dipped below 180. The slide continued this week, quickly dropping to 160. The overall outlook, maybe that should be hope, is that things are bottoming out. However, with the lack of confidence in the futures market we expect that this situation – coupled with further tonnage ballasting into the area, and last palm ships looking a little uncomfortable – to result in a continued softening of rates. With cargo dates currently out till the end of the month, owners will certainly be hoping for more enquiry next week.

Thanks for listening