Markets ---

Dec 14 2018

In November, VLCC utilisation increased to the highest level seen since the beginning of this year at 60.55%, nearly as high as the level observed in November, 2017 (60.58%), McQuilling Services said in a blog.

Through the first 11 months of the year, utilisation averaged 59.99%, compared to 61.95% in the same months of 2017. Although both tonne/day demand and tonne/day supply decreased month-on-month, the pace of declines in the latter was greater than the former. 

Tonne/day demand decreased by 1% month-on-month in November, a slight acceleration from the prior rate, while tonne/day supply decreased by a greater 1.7% month-on-month. 

Despite the bullish trend month-on-month, utilisation remains below November, 2017 levels and well below November, 2016 levels. Over the next month, McQuilling expected utilisation to fall as demand tempers on the back of lower import requirements in Asia, while vessels will continue to be delivered to the fleet amid lacking incentives to scrap tonnage.

Indeed, As the 2018 cargo programme is drawing to a close, VLCC rates slipped, shedding some WS10 points from the beginning of the week, Fearnleys reported.

Fears that announced production cutbacks will have a negative effect come January have prompted owners to try and lock in longer voyages, and thus have been willing to shed a point or two off last done levels to succeed.

However, softening bunker prices have given some reprieve, and as a result TCE earnings remained comparatively strong. Also on a positive note, the western hemisphere continued to attract tonnage, and with the usual winter weather issues, a dramatic rate drop is not expected in the short term.

Suezmaxes saw some of the recent gains eroded, as the fixing volume slowed in the west. TD20 returns were still respectable at close to $25,000 per day but we are close to seeing double digits again as the WS100 levels looks likely to be broken, Fearnleys said.

TD6 held ground with TCE above $50,000 per day. This was helped by increased weather delays but volumes of fixing were thin. The CPC programme is now out for January so more action should be seen in the coming week.

Aframaxes in the North Sea and Baltic enjoyed even stronger rates this week compared to last. This firm sentiment will continue into next week, as the tonnage list is tight for any cargoes loading in the 18th-23rd December window in the North Sea and for 25th-31st December window in the Baltic.

Mediterranean and Black Sea Aframaxes enjoyed a firming market over the last week. Turkish Straits delays put further upward pressure on freight levels, as charterers have had to book forward dates for any Black Sea stems.

Black Sea is currently being worked 1st decade January, 2019 with last done levels at the time of writing (Wednesday) standing at WS215 and cross-Mediterranean vessels trading at about WS10 points less.

With a tightening Aframax tonnage list and Suezmaxes softening, we saw charterers looking for slightly larger tonnage if and when they could to try and take some steam out of the firming Aframax segment.

In a note, VesselsValue said that the MR1 market appeared to be structurally dropping after improvements in cargo volumes in 2016 and a steady 2017. However, the fleet size has started to contract, which may help offset some of the demand drop.

Overseas Shipholding Group (OSG) and American Shipping Company (AMSC) have confirmed that OSG has exercised options to extend the charters for nine AMSC vessels.  

Five of the vessels were extended for an additional three-year term, commencing from December, 2019 and ending in December, 2022. The remaining four vessels were extended for one-year terms commencing from the same month but ending in December, 2020.

OSG had previously exercised an option to extend the charter of the 10th vessel that it leases from AMSC, into 2025.

OSG CEO, Sam Norton said “The decision date for extending our AMSC options has been a focal point for some time. Our decision addresses the uncertainty associated with approaching contract maturities. The extension of charter agreements on all of the vessels enables continuity of our existing operations. At the same time, OSG retains continued flexibility afforded by the serial options remaining, a feature of our contracts which has always been appealing.”

The charter payments are fixed throughout the option periods, which are on a vessel-by-vessel basis and can be exercised individually.

AMSC CEO, Pål Lothe Magnussen, commented “OSG’s decision to extend the charters of all the vessels ensures the stability of AMSC’s cash flow going forward and maintains AMSC’s exposure to an improving Jones Act tanker market through the profit share arrangement. We look forward to continuing our long-standing co-operation with OSG:”

Brokers reported that Hyundai Glovis had chartered the 2016 VLCC ‘Eco Leader’ for 10 months at a healthy $38,000 per day,

Elsewhere, Trafigura fixed the 2011-built Suezmax ‘Shamrock’ for nine months at $19,000 per day, while two LR2s were reported taken for six and nine months each by Koch and Vitol for $17,000-$17,500 per day and Navig8 reportedly agreed $15,500 per day for an Aframax on a six-month charter, plus another for a year at a firmer $18,750 per day.

Three LR1s were reported fixed to various charterers for $13,500-$13,750 per day. An Mr was thought fixed to ST Shipping for six months at $11,500, while two Handies, reported last week as purchased by Viken, were believed fixed for 12 months to Trafigura at $11,500 per day.

In the newbuilding segment, FSL Trust Management, as trustee-manager of First Ship Lease Trust (FSLT) has signed a contract with Cosco Shipping Heavy Industry (Yangzhou) to build, sell and deliver two scrubber fitted Tier III LR2s.

The agreed price was $97.6 mill for the pair. FSL-28, Inc and FSL-29, Inc, each a wholly-owned FSLT subsidiary, will be nominated to hold the new vessels.

The LR2s are expected to be delivered to the buyers in November, 2020 and January, 2021, respectively.

These acquisitions are being undertaken as part of the renewal of FSLT’s ageing fleet, the company said.

The Shipyard is a state-controlled shipyard, is part of COSCO SHIPPING Corporation Group and is based in the People’s Republic of China.

It has been revealed that the Ciner Shipping order reported last week was concluded on the back of a long term charter to Koch.

Recent S&P deals include CP Offen possibly exiting the tanker sector by agreeing to sell two MRs and eight Handies to Tufton Oceanic for $18.5 mill each for the 2010-built MRs and $12 mill each for the 2008-built Handies, according to brokers’ reports.

However, Tufton Oceanic Assets said on Tuesday said it had agreed to buy two product tankers for $36 mill, taking its total fleet to 10 vessels.

Each vessel is operating under a timecharter of two to three years to a major commodity trading and logistics company, Tufton said.

Other deals included the 2007-built LR1 ‘King Darwin’, which was reported sold to Clearlake for $13 mill and the sister LR2s ‘Gulf Valour’ and ‘Gulf Vision’ thought sold to Aegean for $32.4 mill and $31.7 mill, respectively.

In another sale and leaseback deal, Navig8 Chemical Tankers has signed an agreements with AVIC International Leasing to sell two IMOII 37,000 dwt Interline coated tankers and bareboat charter each vessel back for 10 years.

The net proceeds from the transaction were $52.4 mill. Part of the proceeds was used to repay existing loans used to finance the vessels’ newbuilding contracts under the multi-bank loan facility.

During the charter period, the company has purchase options to re-acquire the vessels with the first option exercisable on the second anniversary of the date of delivery of each vessel to Avic. Also included are obligations to repurchase the vessels at the end of the 10-year period.


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