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29 May 2024

Crude tanker market in favour of charterers


By Sunil Kumar Singh

The sentiment in the crude tanker market is swinging in favour of charterers, who see no reason to hurry in and take cover as there would be enough VLCCs (very large crude carriers) to cover their remaining positions, according to a latest report by London-based EA Gibson Shipbrokers.

A slow drip feed of end-month enquiry has resulted in owners pushing for employment creating their own downward spiral, the report released on Friday said.

The week started healthily enough for owners with rates at WS 110 and WS 70 for Far Eastern and Western destinations respectively. The last done stands at WS 97.5 East and WS 59.75 West with further reductions expected, the report said.

Suezmaxes have seen a quiet week with very little in the way of fixing. The few deals that were done are still pointing towards a softer bias partly influenced by what is being witnessed in the West. At present voyages to the East are at around 130 x WS 120. Similarly, Aframaxes although busier in comparison are still following the same trend with rates still proceeding south at around 80 x WS 135.

In West Africa, Suezmax owners have suffered further this week, it said. Even weather delays in the US Gulf have not aided owners and with the continued increase in available tonnage rates will only be eroded with the next wave of fixing.

Although VLCC availability remains tight for natural tonnage, up to first decade of March this size of vessel still remains priced out of the market for US Gulf discharge. Rates would need to come down to around WS 60/65 to compete with the Suezmax tonnage. So far owners have not had to contemplate such levels as they have benefited from alternative employment loading from the Caribbean or US Gulf to the East.

"We have seen deals concluded to West Coast India at $4.3 million (Dh15.7m) and East Coast at $4.55m and for early cargoes levels are likely to be maintained due to tightness of tonnage but rate levels will come under pressure for forward cargoes," it said.

The Mediterranean Aframax market is working in constant cycles. The beginning of the week proffers a well-stocked position list and then by the week's close a number of ships have been fixed away on private terms leaving a healthier picture for owners.

However, by the Monday re-opening, the list has grown and once again the rates come under pressure.

Last week, rates dropped from WS 120 to WS 100 for a vanilla cross-Mediterranean and this week they have dropped again a touch WS 100 to WS 95. "It seems we could be near the bottom now as earnings move closer to operating costs, perhaps the next week could bring a small upswing, though this will be modest at best if it indeed comes to pass," the report said.

The Black Sea and Mediterranean remained lacklustre throughout the week with few Suezmaxes getting fixed. Rates edged lower as the week drew on losing 20 worldscale points. The news doesn't get much better for owners as tonnage is again starting to build up giving little hope for the near future.

Continued VLCC enquiry from the Caribbean has pretty much extinguished all available tonnage remaining for the whole of February. Rates are presently being concluded at about $4.8m lump sum for Singapore with the usual increments for further East.

Aframax levels for the usual Caribbean/ US Gulf run has taken a slight dip caused by a downturn in enquiry but weather delays may yet prove to be of some help to owners, present levels stand at around WS 147.5.

It was a quiet week for Baltic Aframaxes, the report said. Reduced levels of stems have meant charterers have had ample time to quietly pick off tonnage for future stems, which now leaves us looking at third decade dates. The North Sea was also quiet with many ships fixing 80kt at WS 117.5. Next to be done should be lower as the list shows we are long on vessels.

Tanker demolition

With 2010 being the last official year of single hull tanker phase-out, as per the International Maritime Organisation's regulation, the year should be a heady year for tanker demolition, the report said.

The report said 1.2 million deadweight tonnage (dwt) of tanker tonnage has already been sold for scrap this year. However, it said the sheer volume of tanker tonnage for disposal might be the only stumbling block given that Bangladesh is the favoured destination for tanker demolition sales.

Last year 62 of the 93 tankers sold for recycling found their way to the beaches of Bangladesh, mainly due to the higher lightweight prices on offer and the attraction of not requiring gas-free certification. 5.7 million dwt (or 79 per cent) of last year's 7.2 million dwt (world total) of tanker demolitions went to Bangladesh, more than double the previous year, the report said.

Looking back at last year's statistics, 10 VLCCs were sold for demolition with nine of the sales concluded from August onwards. There were four Suezmax sales, while Aframaxes accounted for a further 15, with 12 Panamax and 38 MRs (Medium Range) also removed. The malaise, particularly in the product tanker sector over much of 2009, was believed responsible for many of the removals, the report said.

Given the circumstances surrounding last year, demolition prices remained comparatively firm although well below the lightweight levels achieved in 2008. With 13 per cent of the existing tanker fleet still single hull, there are still plenty of candidates available for this less glamorous part, but nonetheless, important part of the industry, it said.

As regards markets for product tankers, the report said in the East the market has been very quiet. Rates have slipped all week and there is little optimism for the next month, the report said. LR1s (large range) have dropped on Middle East /Japan to WS 155-WS 140, and Middle East- UK Continent is down to $1.75m from nearer $1.90m one week ago.

LR2s have seen almost no fixtures this week but rates have moved down to WS 135 on Middle East-Japan route, but as yet are untested. MRs have also seen big falls on rates with Middle East-West Coast India / Japan now at WS 145 and Middle East / UK Continent fixed at $1.125m, although this is not repeatable and should be assessed at $1.25m, the report said.

Freight levels

Even with a steady flow of cargoes within the Mediterranean this week, freight levels have struggled to maintain. Cross-Mediterranean is now trading at WS 220 basis 30kt, as naphtha stems achieved a small premium. Black Sea exports were securing around WS 230-235. Transatlantic moves remain quiet for both gasoline and naphtha, 37 x 190 deemed as market with naphtha achieving 10 worldscale points on top of this, it said.

After a very quiet week for LRs in the West, owners ideas have fallen, as naphtha suitable vessels were willing to fix 60 x 142.5 level heading transatlantic. The main drive of the Continent markets this week has been trading of gasoline to West Africa. As tonnage began to thin, freight rates rose to WS 205 basis 37kt, for approved tonnage.

It was a quiet week in the Caribbean region, as upcoast movements into the Atlantic basin was securing around WS 140-145 basis 38kt. Backhaul distillate trading to UK Continent and Mediterranean ranges were arranged at WS 85 basis 38kt ex US Atlantic Coast and US Gulf, the report said.


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