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Tanker marker report. AG VLCC market looking 20% oversupplied.

By • Mar 1st, 2013 • Category: Tankers

The Coracle tanker market podcast for Feb 29, 2013 in association with Braemar-Seascope

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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for Feb 28th 2013. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

Starting with the VLCC sector and since we still have a month of the first quarter to run for fixing, it is by no means over, but all indications are that we shall continue in the same vein as we have seen for the first few weeks of the year. AG/East is back to 270 at 32.5, which gives a daily return with slow steaming ballast of $4,750/day. The freight for AG/West, steady for another week at
280 at 18 via the Cape and 16 via Suez, only really covers the bunker costs and offers no earning potential. For the rest of 2013 we need a significant increase of tonne-miles or numbers of cargoes to be able to pull freight rates up from what are now historic lows.

West Africa showed a brief firmness at the end of last week. Most significantly this week a West Africa/USG cargo was quoted and fixed at 260 at 35, showing how keen owners are to stay in the Atlantic given a chance. There has been limited activity for Indian charterers this week.

The 30 day availability index shows 56 VLCCs arriving at Fujairah, of which six are over 15 years old, compared to 47 last week (of which seven were over 15 years old). So far for the month of March we have seen 56 reported fixtures, which means we should have about the same number to come again. We are currently assessing the AG as about 20% oversupplied with tonnage.

For the Suezmax sector and as expectations brewed over the weekend, the West Africa market set itself up for a boost. With positions tightening, and several charterers entering the fray late on with promptish cargoes, rates jumped from 57.5 for UKC-Med to a much healthier 65. Off prompter dates, 67.5 was achievable as the recovery of the Med helped to bear fruit in adjacent markets. Throughout the week these rates have persisted until the first wave of cargoes was covered. Those owners drawn in by a rising market found themselves slightly caught out as the level of cargoes dwindled, with rates dropping down to 55 for the US Gulf and 57.5 for UKC-Med. The Med market that helped drive this momentum has now quietened down and a lack of local cargoes may have led to higher levels of competition for these later West Africa cargoes. It is nonetheless a surprising display of volatility and it will be interesting to see next week whether these markets continue to play off one another. It would be surprising to see a second wave of upward momentum, considering the list. There is a reasonable position list and one cargo off natural dates attracted nine offers. We are yet to really see the last decade, but at the moment March looks a little thin on expected cargoes.

As for the Med itself, a welcome rise last week was perpetuated with rates of 80 fixed to Portugal from central Med. The market soon began to fill its boots with eastbound cargoes, the first of which fixing a reasonably healthy $3.4m to Ningbo, though this perhaps was not quite in line with the increase in cross-Med rates. A forward fixing cargo was smuggled away for a relatively cheap $2.375m to India, cutting momentum, and by the end of the week, a Ningbo bound voyage was only achieving $3.2m. Supporting this is a Black Sea market which, despite two early cargoes fixing 135 at 67.5, has managed to maintain levels around 140 at 75. With UKC, W Africa and eastern ballasters removed from the position list, and bearing in mind normal delays, owners should be able to maintain levels at 72.5.

The Mediterranean and Black Sea Aframax markets have seen activity pick up since last week, which was notably quiet due to IP week. This consequently meant sentiment shifted from soft to flat-strong. At the beginning of the week, a well reported cross-Med fixture was concluded at 80 at 73.75. Although this was from a cheaper load port, and with a better flat rate, this was still over five points less than last done. This seemingly prompted many other charterers to come into the market at the same time. However, due to the number of increased cargoes, no one achieved a similar rate. A few succeeded in fixing 77.5, but the majority had to settle for 80, the same rate as last week.

In the Baltic and North Sea, there was a good amount of activity all round with Baltic ice voyages, cross-North Sea and DPP all working simultaneously. Owners are achieving 100 at 75 for ice class requirements and although that could be deemed as low for this time of year, is at least better than where the week began. In the cross-North Sea market, 80 at 87.5 has been fixed on several occasions and the feeling is that slightly more may be done there. In amongst this are a number of DPP possibilities that need discharge options including trans-Atlantic and Med. We may well see the list tighten a little as a result, and in the short term,
perhaps, a slightly firmer market.

Now the clean markets and in the East the LR1s have enjoyed a buoyant week with activity brisk in the first half of March and rate levels jumping accordingly. It remains to be seen if this bull run can be continued. With the West markets slipping and tonnage more numerous in the second half of the month, it’s likely we’ll see rates to the West remain bullish while numbers to the East level off or even drop a little.

The Atlantic markets saw ULSD pricing finally reach such a low level in the USG that traders started jumping on prompt tonnage. This is relevant because up until now, roundtrip TC2 was such that it is better when open New York to ballast straight back to UKC, with 37 at no less than 140-145 or $13,200/day, versus the triangulation combo of TC14, where front haul is actually eroded down to $12,000/day. Front end vessels at the weeks end were disappearing, including the cheap ‘trans-Atlantic only’ units, and sentiment is certainly firmer as we progress into second decade loading. North West European refinery shut downs and turnarounds offer some additional promise, especially potential St Lawrence river demand, where the Valero St Romauld facility in Quebec City will be down for 2-3 months. This should mean plenty of extra product imports. In addition, Section 105 in Montreal (the Ultramar dock) will also be under maintenance and upgrade, in preparation for Alberta crude runs, again leaving a gap in the usual supply balance.

Thanks for listening