Markets - VLCC rates holding

Feb 17 2017

VLCC rates have held up on the back of steady February cargoes in the MEG, which have started to deplete the tonnage list and roll over into March.

March cargo volume in the MEG is so far thin but ships are being absorbed under coas, Fearnleys reported.  

A quiet start to this week was reported with rates coming off their highs.A few more quiet days will add pressure on rates.

Earnings were still about $30,000 per day but a continued supply of West Africa/East cargoes are necessary to avoid a sharp decline in VLCC rates.

The million barrel market was facing a prolonged period of potential stagnation. However, owners have battled their way back and managed to claw their way out of a corner.

A week ago, rates were at WS72.5 for TD20, whereas currently they are around the WS82.5 level. A combination of vessels being fixed under the radar in various geographical areas and some key owners taking a strong stance by refusing last done levels, has forced charterers to concede ground.

However, the Black Sea market has not found any respite thus far in the early first decade of March with levels steady at WS80 for TD6. The week ahead is potentially positive with charterers currently reaching forward on dates in West Africa much to the owners delight.

North Sea and Baltic moved up quite a bit at the end of last week and are still looking interesting moving into March fixing.

This was mainly caused by tonnage leaving the area in laden condition, and a rush of ex-North Sea cargoes in the 18th-25th February window.

If we see a steady flow of fuel oil cargoes ex Baltic, Ice Class rates could easily strengthen by another WS5-10 points.

In the Med and Black Sea, charterers have now covered all the Black Sea stems for the month and are well underway with the ex-Med cargoes.

Last week, the rates moved up to WS105 for ex Black Sea. However for the week to come, the tonnage list is again looking fairly balanced, and we therefore expect the rates to remain stable at just below WS100, Fearnleys concluded.

Elsewhere, The Asian Aframax market is currently stable but seems to be facing a more positive outlook on the back of short-term time charters, as well as an increase in third decade cargoes, Ocean Freight Exchange (OFE) reported.

Rates for an Indonesia/Japan trip basis 80,000 tonnes are hovered around WS100-WS102.5, while rates for the AG/East route basis 80,000 tonnes stood at WS115.

Reflecting firmer owner sentiment, TD14 inched up steadily week-on-week to WS100.78, which translates into daily earnings of around $8,700.

At least three Aframaxes were taken by ST Shipping and Petrochina on short-term time charters of up to 90 days to potentially store fuel oil.

As seen from the structure of the 380 cst fuel oil complex from March onwards, this does not seem to be a contango play but instead due to a lack of onshore storage facilities, OFE said.

While prompt-month time spreads of 380 cst fuel oil recently flipped into contango at -$0.5 per tonne, the near-term market structure remains in backwardation.

Singapore’s onshore fuel oil stocks expanded by 8% to reach 25.8 mill barrels last week, hitting an 11-week high. Despite bloated inventories, lower March Western arb volumes (down by 20% month-on-month), as well as steady bunker demand is expected to keep the Asian fuel oil market supported, OFE concluded.

Broking sources reported a few fixtures during the past couple of weeks, including the 2011-built VLCC ‘Chloe’ thought taken by unknown interests for six months at $30,000 per day, while SKE was said to have fixed the 2009-built VLCC ‘C Prosperity’ for two years at $30,500 per day.

Shell took another VLCC following last week’s business. This was the 2000-built ‘Antonis I Angelicoussis’ fixed for 12 months at $19,000 plus a profit share of 50% if the TD3 goes above $31,000 per day.   

Staoil was said to have taken the 2016-built Suezmax ‘Amber’ for six months at $24,000 per day, while Unipec was believed to have fixed the 2006-built Suezmax ‘Montreal Spirit’ for 12 months at $22,000 per day.

The ‘LR2 Poseidon’ was reportedly fixed to Shell for 45-90 days at $11,750 per day with delivery SAouth Korea at the end of February. The 2015-built LR2 ‘Densa Crocodile’ was taken by Vitol for six months at $16,500 per day, while the 2006-built LR1 ‘Eternal Diligence’ was fixed to Shell for 12 months at $12,000 per day.

In the smaller product tanker sector, Stena Bulk was said to have taken the 2011-built MR ‘Miss Marina’ for six months at $12,750 per day, while ORL took the Handies ‘Bentley 1’ and ‘Chrysopigi’ for 12 months at $13,000 and $11,500 per day, respectively.

Concordia Maritime has confirmed that it is to sell the IMOIIMAX ‘Stena Important’ to a Japanese financial institution on a sale & lease back basis for $36 mill.

This represents the company’s third such deal in a short period of time.

Delivery is expected to take place take place at the end of March. Under the agreement, the vessel will be chartered back to Concordia on a bareboat basis for nine years, with a purchase obligation in year nine.

“Once again, we have successfully conducted a good transaction that creates significant values. Just as with the previous transactions in autumn, this is a way of preparing ourselves for a subdued market situation and the good business opportunities that may arise there. We are working actively on the fleet’s structure and disposition, and the leaseback arrangement enables us to continue employing the vessel in the successful Stena Weco pool,” explained Kim Ullman, Concordia Maritime CEO.

Fearnley Securities acted as broker and financial advisor to Concordia Maritime for this transaction.

Other sales reported included the 2011-built VLCC ‘Orthis’ thought purchased by TMS Tankers for $57 mill and the 2012-built MR sisters ‘Nisida’ and Miseno’ to unknown interests for $22 mill each.


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