Tanker market news and views May 24By james tweed • May 24th, 2013 • Category: Tankers
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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for May 24th 2013. This report looks at the VLCC, Suezmax, Aframax and clean products markets.
Starting with the VLCC sector and at the beginning of this week there seemed to be a missed opportunity for owners: a Chinese charterer had attracted few offers and some were wondering if the 270 at 37.5 level being talked was in fact a little soft. Alas, we were wrong and 270 at 37 was fixed again. Charterers sensed lack of confidence and held away from the market and more jitters were caused when rumours began to circulate that 270 at 35 had been fixed. As it turned out, this was a couple of Eastern oil company relets swapping stems but the damage was done. S-Oil quoted and somehow convinced an owner that 274 at 33.75 was an acceptable rate, despite very few offers. The owners who have fixed at these levels might be regretting it as since then, other charterers looking to replace tonnage off earlier dates have been seeing numbers in the 40’s. Hindsight is a wonderful thing, but one might try a modicum of foresight assessing the number of stems yet to be fixed and the number of vessels offering into a widely quoted cargo to assess one’s market perception. Hence, by Wednesday it seemed that the collective hard work of the previous week was undone in very few fixtures. Winston Churchill once said, “We have nothing to fear except fear itself”. When you are a small VLCC owner, frightened of missing your perfect loading dates or a specific cargo, there is added pressure to fix a little less than last done. Those that had fortitude were rewarded when Chinese charterers fixed 270 at 37.5. This reset the market at this level, and has been repeated 4 or 5 times, and some stability has returned.
For western bound cargoes, there were jitters from owners. Exxon were able to secure a modern vessel for AG/USG via the Suez Canal at 280 at 20, which was considered a respectable rate for both parties. Since then, there have been reports of a similar freight rate fixed via the Cape which is a better freight rate for the charterers than the owners.
Looking at the Suezmax sector and after a grim state of affairs unravelled in West Africa last week, some hoped in vain that the market had bottomed out at 52.5 for the US Gulf. Unfortunately this wasn’t the case as another quoted cargo early on once upset the market after receiving 8 offers, with a ship taking the first counter at 51.25 for UKC-Med. Worldscale 52.5 for US Gulf was then fixed, but on a replacement cargo and alongside a US West Coast option at 62.5. We also saw a short cross-West Africa at $580,000 done mid-week, with news of a worldscale 50 for UKC-Med later on, suggesting the market was even more dire. Rates do appear to have bottomed as owners’ earnings were eroded further and there seems little appetite for taking it any lower. Fundamentally, there are still far too many ships available in the West and this will mean that rates are unlikely to recover off natural dates in the short term.
The Mediterranean was relatively busy, but with some cargoes fixed on COA and others keeping rates quiet, there was little evidence of any change. 65 was once again achieved for a short cross-Med off early dates, whilst 50 for the US Gulf was followed by a 47.5. Meanwhile Black Sea stems sent some tonnage across the Atlantic, though 47.5 represented a drop of 2 and half points. This mirrored the UKC-Med levels. Not only is the tonnage list healthily populated by Med vessels able to make laycans with relative ease thanks to the one day straits transit, but there are also numerous ships building up in the East Med, which are more than happy to take on convenient Black Sea cargoes. The North Sea market was fairly uneventful, maintaining the 47.5 levels we saw going trans-Atlantic last week, with a couple of EC UK options alongside these.
Now the Aframaxes and it was a promising start to the week in the Med/Black Sea markets, with a longer list of enquiry along with June programmes coming out yielding a firming of rates by 2.5 points. This was just end month clearing and fewer available ships could make laycans. Cross-Med seemed to have reached a plateau at 80 at 75 and the same rate was being done for 80 Black Sea/UKC-Med. Sentiment seems to be softening with most of May enquiry being quickly and quietly covered by prompt ships. There are plenty of ships on subjects, but owners have more tonnage coming up behind. With the second May bank holiday looming for the UK, fixing will remain quiet until June programmes start to be worked next week. The stagnancy of rates could mean charterers are holding off until a market cargo can illuminate if the current levels have any backbone.
The start of the week showed signs that the North Sea and Baltic Aframax markets could and most probably should firm. With a good flow of demand out of both the North Sea and Baltic for end May/ early June stems, one prompt North Sea cargo in the market on Monday paid a healthy premium on top of last done, where an owner managed to achieve the equivalent of 80 at 93.75, which was paid for the only available vessel. The tonnage list continued to thin out, which injected sentiment into the market with owners showing some signs of bullishness when talking the market up. Unfortunately, things did not materialise as one might have hoped for after seeing the higher rate paid. Owners failed to take advantage of replacement cargoes, covering at previous last done levels and the steam, if you can call it that, was taken out of the market.
Turning to the clean markets and in the East it has been a very poor week for the LR1s and LR2s with rates further softening to a reported 72.5 for LR2s AG/Japan. A slight recovery since that point means rates are now at 93. There is some talk of improvement in levels going forwards but any recovery on LR1s is going to be hampered by the still weak LR2 levels. Tonnage is now committing to coming through into the Red Sea and AG due to a lack of any alternatives in the West, despite one ship being picked off for naphtha Med/East at $2m. With last done on that route closer to US$2.5m, the western market has taken a real hit due to over-tonnage.
In the West and MRs took some heat and even surplus Oil Company relets struggled to see firm trans-Atlantic enquiry; rates softened down below 37 at 140. With Time Charter Equivalents now below $13,000/day (and that’s on the basis of no waiting time), the outlook is weak, even with more volume anticipated for UKC/West Africa and UKC/West Africa.
Thanks for listening