Another poor week for big tanker owners….By james tweed • Mar 18th, 2013 • Category: Tankers
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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for March 15th 2013. This report looks at the VLCC, Suezmax, Aframax and clean products markets.
Starting with the VLCC sector and it has been another poor week for owners. Vela were the first to test the strength of the market with April dates and succeeded in collecting competitive offers. The attraction of the back haul cargoes from the Caribbean enhancing earning capacities under triangulation continues to outshine earnings in the East. Cargoes from the AG via the Suez Canal have also been keenly contested, with greater discounts being offered to secure employment and the reimbursement of Suez ballast costs adding to the dismal daily return. The confirmation of Saudi stem dates this weekend has prompted some charterers to jump the gun and test the market before the expected increase in volume of cargoes for the early April laycans next week. Once again, ships were placed on subjects with very little confrontation at levels last done with a slight premium being paid for the higher commissioned cargoes and those shorter voyages. The availability of excess tonnage at the Fujairah anchorage, the diminishing cargo count each month and the fragility in the owners’ confidence have all lead to another lacklustre week within the AG.
It has been a busy second decade of April in West Africa, however rates continue to remain steady around the 35 level for a W Africa/China run. The likes of Unipec, CNOOC, Glasford and Day Harvest have been ticking away their 10-20 April program and achieving their desired rates with relative ease. The volumes in April from West Africa have been better than March, however the supply of ample tonnage ballasting from the East for West African cargoes is giving little encouragement to owners as far as pushing up rates is concerned. The outlook on rates for the remainder of April looks to stay at the current levels as we head into third decade April fixing from the region. Indian charterers continued to cover their West African requirements for April, with IOC entering the market for its second requirement for the month off 14-15 dates. We are assessing W Africa/WC India at $3.1m and W Africa/EC India at $3.4m. Rates in the Caribbean softened slightly this week as the new level for a Caribbean/Singapore run was established at $3.75m in comparison to $3.85m last week. The softening is due to excess tonnage available for the first decade of April stems, with about five ships rolling over from March. Activity on the Continent was at a bare minimum this week as charterers from the region wait for firm discharge orders to be given to ships fixed west in order to be able to get a clearer picture of the tonnage available for first half April stems.
The 30 day availability index shows 42 VLCCs arriving at Fujairah, of which three are over 15 years old, compared to 48 last week, of which four were over 15 years old. So far for the month of March we have seen 105 reported fixtures, now close to the end of March program. The overhang of tonnage carrying into April dates will be around 15 ships and therefore somewhat balanced, but taking into that account there have been no Chinese vessels shown outside their usual contractual obligations, we can expect the oversupply to be in excess of that on the lists. The bunker price is $633/tonne, down $6 from last week.
Turning to the Suezmax sector and the West African market finished last week with a bit of a flourish. An east cargo managed to fix at 60, but this didn’t stop other owners from fixing UKC-Med at 60 and holding the rates. The differential for UKC-Med over USG
has increased to 5 points in recent times and this looks to have become the norm in the Suezmax market. The early part of this week was dominated by reports of last week’s fixtures as all the deals done quietly came out and owners and charterers took stock of where the market should have been. There were a good number of fixtures done of end month dates and rates remained at 55 to the US Gulf and 60 to UKC-Med. It is clear that March dates in West Africa should be finished, so owners will be waiting for April dates to come. There looks to be some tightness in the list for the early month position, but it certainly needs some activity off those dates to start pushing rates. At the moment, charterers appear to be drip feeding cargoes in quietly and fixing without making much noise, and this should guarantee that rates remain stable. The thinning of the list has been aided by good levels of activity in the Caribbean market. If we see a clutch of cargoes off early dates then rates could move, however at the moment this seems unlikely.
The cross-Med market remained fairly quiet this week with a relatively early Ceyhan cargo fixing 67.5 for UKC-Med. The cargoes that have become most prevalent in recent time are the east voyages and once again we saw these voyages being the most commonly fixed. With the eastern market remaining quiet, there were owners willing to ballast through from the East to fix these voyages. There were a couple of end month Black Sea cargoes which looked like they may get left behind – especially when one needed to be replaced – but rates rose only slightly to 140 at 70 and this completed the Black Sea program for March and left owners waiting a week or so until the April Novorossiysk stems come out. The list remains finely balanced for westbound voyages and although the market appears to be just ticking over, there is certainly potential for owners to try and push it. It remains to be seen if they can take advantage of what looks like a short term opportunity as the Turkish Straits delays are reducing and the weather in the Mediterranean is improving.
The Baltic Aframax market saw some improvement this week, albeit short-lived and not quite the rates we should be seeing at this stage of the ice season, if we can call it that. There were a number of vessels delayed on the East Coast of the UK, which, in addition to ice class tonnage tightening for 18-25 dates in the Baltic, yielded a short spike in rates, peaking at 100 at 100 for Baltic/UKC for fuel oil, with an option for trans-Atlantic at 120. This is the highest premium seen so far this ice season. However, next done was back down to 100 at 92.5 for a crude cargo loading from Ust-Luga, which in itself was a replacement fixture. One would suspect the market to correct itself back down to the levels we saw previous to the brief spike. The North Sea has continued to tick over steadily at 80 at 90. Although tonnage for prompt dates looks fairly short, we expect cross North Sea rates to remain steady in to next week.
In the Mediterranean and Black Sea, owners have been helpless to the downward pressure caused by a long tonnage list. Those looking for some bad weather and resultant replacement fixtures unfortunately had no luck. And so, charterers have been able to chip away at fixing rates and bring levels below 80 at 80. At present, enquiry still appears limited, with nearly all of this month’s Black Sea program covered. However, there is still some cross-Med fixing to be done for the 25-31 March window. With respect to owners, the market is flat at best, while last done is 80 at 77.5 for both Black Sea and cross-Med cargoes.
Now a look at the clean markets and it has been a busy week on the LR1s and LR2s and rates have made some real gains in the Middle East and the North Asia back-haul markets. Rates for LR2 are back up above 90, and owners are gunning for 100.
LR1s, with a tonnage list that looks very tight through April, have seen levels of 135 on subs and owners pushing for much higher levels. However these rates, combined with a weakening west market, should bring in ships from the Mediterranean, which will start to temper further gains…
In the West it has been another over-tonnaged week with little demand in NW Europe. As with the last two weeks, we have seen a mid-week spike of activity with the arbitrage open for a short period of time, and rates have remained relatively low at around 37 at 147.5.
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