VLCC tanker report June 14. (Would you like a new tablet?)By james tweed • Jun 14th, 2013 • Category: Tankers
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Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for June 14th 2013. This weeks report looks at the VLCC market.
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Some interesting developments in the sale and purchase of older tankers over the last few weeks reflects the sad reality of the markets. As vessels get older, they have generally devalued to their scrap metal price. However, only recently have 12 or 13 year old ships got so close to their value in steel alone. Two 280,000 deadweight tanker, built in 2000 were recently sold for about $20 million. Their approximate value in scrap is $16 million. If steel prices remain stable you are effectively risking $4 million for 2-3 years of trading. Depending on the quality and scope of your owning operation, you can keep approvals for longer on the older ships, thus some owners see this as an opportunity to take a gamble and make some money. On the flip side, the fact that large companies are selling ships only 20% above scrap price proves they see little improvement in a VLCC’s ability to earn above operating costs. There are specialist trades which can accommodate older vessels and it is an owner’s ability or willingness to enter these trades which decides whether one is a buyer or seller of a 13 year old VLCC. Only time will prove which party has chosen the correct course of action. In the bigger picture, investing $4m to trade a vessel for two years is cheap compared to some of the $160m three year old VLCCs which will be paying more than $10m a year to trade the vessel until similar scrap values.
In the day to day VLCC market this week, once again the late running ships in Singapore helped the AG market as late replacements maintained rates at last done levels and even helped improved for a couple of unfortunate charterers. Exxon needed to replace a late ship and had to pay 280 at 27 via the Suez Canal, a 5 point premium on last done. Charterers fixing off natural dates have found life easier as we get towards the end of the month, and off those positions the market is stable at 270 at 42.5. Charterers looking for vessels for western discharge have found that there is strong resistance for June dates while July is in theory a friendlier position; with plenty more available ships there is somewhat of a disagreement between owners and charterers as to where rates should be.
West Africa has again seen some confusion about where the market should be. Having started the week at 260 at 38.5, a greater volume of cargoes pushed rates back up to 42.5 for West Africa/China. Possibly reflecting the uncertainly of where the market should be. Very little activity is reported on westerly discharge from the area and the state of the Suezmax market will ensure that the Suezmax route will remain preferred for the moment.
The 30 day availability index shows 59 VLCCs arriving at Fujairah, of which 6 are over 15 years old, compared to 52 last week. We are up to a total of 110 fixtures for the month of June and if we continue to see cargoes, we will be enjoying a bumper month above the average fixture count of 110. Despite the availability of tonnage outweighing the number of cargoes available and a probable hangover of about 20 ships into the next month, owners are feeling confident for the moment to keep pushing for similar or better rates.
The bunker price is $602/tonne, down $9from last week.
Thanks for listening