Rate levels continued to weaken in most of the loading areas, Fearnleys reported.
TCE ex MEG is rapidly approaching operational costs and hence owners resistance is building but the vessel supply situation remains ample going forward.
Owners with modern vessels in the east are turning to cargoes in the west without finding much relief.
A slight improvement in Suezmax rates was seen during last week. The market topped out at WS95 for TD20 for end 2nd decade dates.
This upward trend was purely driven by bullish sentiment going against the grain of high availability on position lists. However, the early part of this week saw charterers employing their starvation tactics with only a sprinkling of cargoes offered for owners to work.
Patience has paid off and we are experiencing a slight slippage of levels as reality bites.
Very little to report out of the Black Sea region with Turkish Straits delays seemingly steady and sparse action off end month dates holding rates steady for TD6 at WS95 levels for now.
We expect the fixing activity to pick up over the coming week. A steady market outlook prevails.
Aframaxes trading in the North Sea and Baltic have have experienced a week where rates were at bottom levels.
Next week, we expect the market to firm on the back of a busier Baltic and North Sea programme, Fearnleys said.
In the Med and Black Sea, cargo activity remained at decent levels. Some owners were trying to push for a couple of extra points, but the list of available tonnage was still long and dates being worked were far forward.
Some owners might be lucky but we believe the market will remain steady for the rest of the week, Fearnleys concluded.
Meanwhile, the Asian VLCC market has also faced unrelenting downward pressure in recent weeks, with rates for the benchmark AG/Japan route plunging by WS15.5 points month-on-month to WS54.5 as of Wednesday, Ocean Freight Exchange (OFE) said.
This translates into $7.99 per tonne, which is 44% lower than that seen in 2016. A smaller AG December loading programme, as well as build-up of tonnage in key loading areas, weighed heavily on market sentiment, dashing owners’ hopes of a winter spike.
Lower cargo demand can be attributed to an expected ease in Chinese crude imports this month, as the powerhouse loses its once voracious appetite for stockpiling on high crude prices and some independent refiners run short of import quotas.
China’s October crude imports hit a 13-month low at 7.3 mill barrels per day, as the backwardated structure in crude encouraged the drawdown of commercial oil inventories.
According to the official Xinhua news agency, Chinese crude commercial stocks plummeted by 9.5% month-on-month to a multi-year low of 197.6 mill barrels at end-October, as refiners ramped up crude runs to the second-highest level on record of 11.26 mill barrels per day.
Looking ahead, we may see a slight rebound in January crude imports on the back of higher crude import quotas for independent refiners in 2018, OFE said. This will provide some temporary relief for the struggling crude tanker market, which continues to face delays in any substantial recovery.
The recent extension of the ongoing OPEC production cuts until end-2018 does not bode well for the VLCC market, which has seen a fall of around 10% in ex-AG fixtures per month amidst rapid fleet growth of 7.5% this year.
Also the massive drop in floating storage this year has released older units into the trading fleet, further lengthening vessel supply.
While emerging long-haul trades from the Americas to Asia and subsequent growth in tonne/mile demand remain the silver lining in the cloud, cargoes continue to move on an opportunistic basis.
Rising scrap prices may also encourage more tanker scrapping and help to alleviate the current supply glut, OFE concluded.
In the S&P sector, Ocean Yield has agreed to acquire three Nordic American Tankers (NAT) newbuilding Suezmaxes with 10-year bareboat charters back to the seller.
The net purchase price is $43.2 mill per vessel after seller’s credit. The net purchase price constitutes 77.5% of the gross purchase price, which is equal to the yard contract price.
The vessels are scheduled to be delivered by Samsung Heavy Industries in June, August and October, 2018, respectively. NAT will have options to acquire the vessels after year five and seven, in addition to an obligation to repurchase the vessels at the end of year 10.
Ocean Yield CEO, Lars Solbakken, said in a comment: "We are pleased to announce the acquisition of three high quality Suezmax tankers with long term charters to Nordic American Tankers Limited. This transaction fits well with our strategy to invest in modern vessels with long term charters.”
In other S&P news, Euronav has sold another large tanker. This was the 2004-built VLCC ‘Flandre’ which has been committed for $45 mill for an FPSO conversion project.
A capital gain of around $20.3 mill on the sale will be recorded in the current quarter. The vessel is expected to be delivered this month and will be converted into an FPSO by her new owner and will therefore leave the worldwide VLCC trading fleet.
CEO Paddy Rodgers, said: “This is a remarkable accomplishment for Euronav and simultaneously achieves two key objectives for the company. Firstly, it profitably assists our fleet renewal programme by reducing the age of our fleet and will allow capital to be recycled into modern tonnage. Secondly, this is the seventh vessel we have successfully introduced into an offshore project, further demonstrating our reputation for providing high quality operational tonnage for the offshore sector.”
Another VLCC, the 2000-built ‘Meandros’ was reported to have been sold to Greek interests for the mid-$19 mills.
The 1999-built Handysize ‘Orion Express’ was said to have been sold to undisclosed interests for $5.35 mill.
In the charter market, brokers reported that ST Shipping had taken the 2005-built Aframax ‘Seaheritage’ for 12 months at $14,500 per day, while Trafigura was said to have fixed the 2013-built MR ‘St Katharinen’ for six months at $14,500 and Bharat Petroleum was thought to have taken the 1999-built MR ‘Sanmar Stenza’ at $14,000 per day for 12 months.
In the newbuilding segement, last week’s reports of newbuildings at Hyundai were believed to have placed by Kyklades and Sinokor for around $81 mill and $83 mill, respectively. The latter was said to be signed on the back of a charter to GS Caltex.
Daewoo was also thought to have won an order from Aeolos for a VLCC, while Hong Kong-based private owner Goldwin Shipping was thought to have gone to CSSC Chengxi for two 55,000 dwt chemical carriers, plus options.