Podcast looking at the titanic struggle to the bottom of the AG/West VLCC market. Feb 8.By james tweed • Feb 8th, 2013 • Category: Tankers
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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Feb 8th 2013. This report looks at the VLCC, Suezmax, Aframax and clean products markets.
This week, the VLCC market has been a titanic struggle to the bottom of the AG/West market. Given the sparse nature of western bound cargoes, especially via the preferred routing through the Suez Canal, owners have fought tooth and nail for the available cargoes. The bar was initially set quite low with Exxon achieving 280 at 17.25 via Suez. Another American charterer then set a via cape rate at 280 at 19. Irving set a new low, and possibly a record, managing to fix 280 at 15.5 via Suez. Having seen the Americans and Canadians lead the way, our Middle Eastern friends at KPC knew the time was perfect for a quote and managed to convince that 280 at 18 was a good idea. It proves quite how desperate owners are to try to triangulate the way the western bound cargoes are contested. Meanwhile, AG/East is monotonous at 265kt at low 30’s, barely breaking into positive territory and certainly not offering any hope of increased earnings for the foreseeable future.
The Atlantic has followed the AG/East market as it has slipped to 260 at 33 off early March for W Africa/China. Earlier in the week, a West Africa/West VLCC was traded, but owners were uninspired by the 260 at 40 available and the cargo was covered on Suezmax tonnage. There were no fresh cargoes seen from the Indian charterers this week as the lack of activity from their side continues. We expect the public oil companies in India to have their West Africa liftings towards the second half of March. IOC lifted only two cargoes for February from the region and should have up to four cargoes for March dates.
The 30 day availability index shows 57 VLCCs arriving at Fujairah, of which three are over 15 years old, compared to 62 last week. There are still another 20 cargoes to be fixed from the AG, but with almost twice the number of ships in position, it is difficult to see any upward movement in freight rates. Bunker prices have risen and still freight rates fall under the weight of the vast VLCC fleet.
The bunker price today is $650/tonne, up $16 from last week giving earnings figures that are so dismal that they’re probably best left unsaid.
Moving to the Suezmaxes and the Mediterranean was quiet until midweek, and was not helped one bit by the Black Sea market which, having fixed the February program, was waiting for the March dates to be confirmed. By the time we saw a charterer stretching out for March dates, rates had not moved and seemed solid at 140 at 57.5. Of the activity that did go on in the Med, the large majority was eastbound with $2.75m to Thailand and Indonesia alongside a $3.175m to China. The weak Med market was demonstrated as trans-Atlantic rates slumped to a meagre 46.25 and 42.5 to Brazil. In the end, these rates were comfortably poorer than those off the UKC where 49.5 fixed to the USG. There was a reasonable amount of tonnage to justify the UKC rate, although the presence of ice might have been expected to push rates higher had there been sufficient demand for vessels. As it was, cargoes were scarce and owners had to settle for lower rates than those we saw close off last week.
Since this time last week, Baltic Aframaxes have, as expected, softened further to currently 100 at 65 for ice class tonnage Baltic/UKC. As we mentioned last week, maintenance at Primorsk and an overtonnaged list has forced rates to bottom. The only hope for owners is that the weather delays in the Bay of Biscay continue to delay vessels, causing replacement fixtures in the market. We have seen a number of DPP cargoes destined for trans-Atlantic this week which has helped give owners another welcome option to employ their tonnage for longer periods. North Sea cargoes continue to be covered at 80 at 85 and we anticipate rates to remain flat moving into next week. In the Mediterranean and Black Sea there has been little activity and this has taken the positive sentiment out of the market, meaning rates have come off.
The clean LR1 and LR2 markets can be summed up with words such as boredom, disinterest, unrest and dissatisfaction. Rarely has there been so little to raise the spirit or quicken the heart as the turgid and fetid miasma that has enveloped us. Yes, there are a few cargoes out there and yes, a couple of things went on subs. But all it has proven is that you can never call the bottom. Someone will always chisel a point or a few grand here or there, whether it’s because they’ve got a redelivery option or they just want to bail from the Eastern markets into the warm, and profitable, embrace of the Atlantic basin.
In the West and MR Atlantic rates remained healthy this week, and ships were booked consistently above 37 at 190 with ice class tonnage achieving 37 at 220 plus for ‘double breach’ charters. 2nd half saw naphtha and components arbitrage open up again for trans-Atlantic, and although a slightly more front loaded position list saw some owners pressured to break 190, the outlook is still firm as real itinerary vessels are still at a premium.
Thanks for listening