Markets - Firming rates not expected soon

Jun 16 2017

As the June MEG programme is almost finished and WAfrica/East is probably finalised up to mid-July dates, VLCC rates appear to have peaked.

MEG July stems have started ex BOT and charterers were working hard to squeeze rates, Fearnleys reported.

There was some resistance and VLCC rate levels, although still only mid $10,000s per day, found some support.

Suezmaxes experienced a challenging week, as cargo enquiry faded and tonnage lists swelled. Owners tactics have been to fix as early as possible on dates closest to their positions, but new rate lows for the year were recorded as the situation worsens.

This situation was not helped by several vessels failing subjects and thus being re-circulated as prompt ships. TD20 has been hovering around the WS62.5 for much of the last week but this level is now also under pressure.

Enquiry in the Med and Black Sea has been more prevalent and one Indian cargo - Arzew/west coast India - attracted 16 offers, which made for uncomfortable reading. This activity staved off a complete collapse in the market, as ships were steadily picked up.

The signs for owners in the coming weeks are not rosy but it has taken some longer than others to digest this fact, as we are not far off the bottom and the key for these owners will be to keep their ships moving, the broker said.

The North Sea and Baltic Aframax market was far more volatile than expected lately and once again rates are heading north. This occurred as Primorsk came back on stream after pipeline maintenance, in addition to increased activity in fuel oil and cross North sea cargoes. Rates are currently sliding, but could face another upward correction.

The Med and Black Sea have had a steady week with rates moving from low to mid-WS90’s. Libyan activity saved owners from the TCE moving down to break even numbers.

July marks the start of the summer volumes, so we do not expect the market to firm anytime soon, Fearnleys warned.

There were no new orders of any significance reported in the past week or so.

However, Bahri said that it had taken delivery of its 38th VLCC ‘Maharah’ form HHI on 12th June.

“The addition of ‘Maharah’ further strengthens our position as the world’s largest owner and operator of VLCCs. We celebrate this important milestone only months after accepting delivery of our 37th VLCC ‘Amjad’. In current times, fleet growth is critical to offsetting low spot market rates and the timing of this delivery could not have been better,” Ahmed Ali Al-Subaey, Bahri’s board member, commented on the delivery.

“The partnership between Bahri and Hyundai Heavy Industries spanning over a decade has been highly successful, with 26 vessels ordered and delivered to date and eight more VLCCs currently on order, among which three will be delivered this year,” Ali Al-Harbi, Bahri’s acting CEO, said.

In a quiet week for reported charter deals, Trafigura was believed to have fixed the 1998-built VLCC ‘Millennium’ for between one to six months at $16,000 per day, while Shell was said to have taken the MR sisters ‘Sunny Day’ and ‘Sunny Dream’ for six, option six, months at $12,000 per day per vessel.

In the S&P sector, Scorpio Tankers (STI) announced that it has completed the acquisition of four LR1s from Navig8 Product Tankers (NPTI).

On 23rd May, 2017, STI said that it had agreed to acquire the LR1s as part of the definitive agreements to merge with NPTI. STI paid $42.2 mill in cash and assumed $113.8 mill debt. 

The cash is expected to be used by NPTI for general corporate purposes, including working capital, and any remaining cash at the closing of the merger will form part of the balance sheet of the combined company.

It is still subject to the completion of certain customary conditions, including without limitation, the approval of the majority of the outstanding shares of common stock of NPTI, the registration statement filed with US Securities and Exchange Commission (SEC) by STI to register its shares of common stock to be issued as consideration in the merger becoming effective under the US Securities Act of 1933, as amended, and the listing of such shares on the New York Stock Exchange.

The merger is expected to close in the third quarter of 2017, STI said.

Winson was reported to have been active again by purchasing the 1999-built VLCC ‘DS Commander’ for $16.5 mill and the 2004-built LR2 ‘Ruby Express’ for $12.3 mill.

Greek interests were said to be behind the purchase of the 2010-built MR ‘Nord Integrity’ for $17.5 mill, while Sri Lankan interests were believed to have bought the 1994-built Handysize ‘Santrina’ for $3.5 mill.

Reported leaving the fleet was the 1995-built Aframax ‘Med Star’ said to have been sold to Indian recyclers.   

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