Markets - VLCCs on a soft rebound

Apr 18 2019


As expected, the VLCC market bottomed before starting a soft rebound, particularly from West Africa and in the East.

With Suezmaxes, demand remained strong particularly in the Med and Black Sea, with rates firming up to WS77.5 for West Africa/Med and to WS95 for BlackSea/Med, Banchero Costa reported.

 

In addition, healthier numbers were seen eastbound. The MEG/West market remained between high thirties and low forties, waiting for May stems to be announced/worked next week.

 

The Aframax Med market remained very soft, and we noticed a number of ships heading to the area, also with Urals cargoes from the Baltic.

 

Otherwise, rates were pretty much steady in Northwest Europe, in the Americas and in the East, the broker said.

 

A few newbuilding reports trickled in.

 

For example, the Tristar Group signed firm contracts for six 25,000 dwt, IMO Type II oil and chemical tankers with Hyundai Mipo Dockyard.

 

The vessels will be delivered between the middle of May 2020 and the first week of January, 2021.

 

They were ordered on the back of long-term charter contracts with Shell.

 

Okeanis Eco Tankers has ordered two Suezmaxes at Hyundai for delivery in the third quarter of 2020.

 

The orders were placed as the result of an option, which secured the right for the company, at no cost, to acquire the option vessels at the sponsor (Ioannis Alafouzos) acquisition price.

 

This option was given by Alafouzos following a unanimous decision by the board of the directors of Okeanis Eco Tankers not to exercise its right of first refusal to step into tanker transactions sourced by the sponsor.

 

The option is exercisable at any time on or before 1st November, 2019. In the event that the company does not exercise the option, it will receive a daily fee of $600 per vessel from the sponsor for the commercial management of the vessels upon their delivery.

 

Alafouzos explained: “After careful evaluation of the opportunity, its entailed capital requirements and impact on the company’s forecasted per-share financial metrics relative to the company’s current potential, the Board decided to forego the opportunity to grow the company."

 

"The Board is of the unanimous view that the company’s fleet is already well-positioned –- in terms of size, composition, age and growing spot market exposure –- to capitalise on the strengthening tanker market, and that further growth is thus not warranted at this time.

 

"Nonetheless, as the sponsor of the company, I have granted the company the option to acquire these vessels from my private vehicle at the price I contracted them, further enhancing the company’s already considerable exposure to rising tanker asset value upside at no cost.

 

“The main drivers of the decision by the company to exercise or not exercise the option will be the prevailing market conditions, asset values and the company’s cost of capital (of which the share price discount or premium to Net Asset Value is a key metric) at the relevant time," Ioannis concluded.

 

In the charter market, TOP Ships announced that the recently delivered scrubber fitted Suezmax ’Eco Bel Air’, built by Hyundai Samho, commenced its previously announced timecharter employment with BP on 11th April, 2019.

 

The revenue backlog expected to be generated by this fixture, assuming all options are exercised, is about $47.5 mill. For 2019 alone, this charter is expected to increase revenue by $6.6 mill, the company said.

 

Remaining in the charter market, brokers reported that the 2010-built Aframax ‘Eserk’ had been fixed to OSG for six months at a firm $26,500 per day, while BP took the 2017-built MR ‘Coral Express’ for two years at $16,250 per day.

 

Recent Aframax fixtures were reported at around $19,500 - $21,000 per day, while MRs were concluded for about $14,500 per day, illustrated by Clearlake’s fixture of an MR for 15 to 21 months at $14,550 per day.

 

The S&P sector was reasonably active in the past few weeks with several deals reported.

 

These included Zodiac purchasing the 2007-built VLCC ‘Tamagawa’ for $36 mill.

 

The veteran 1998-built Suezmax ‘Maran Capella’ was thought to have been committed for storage duties at an undisclosed price, while Vitol was said to have bought the 2018-built LR2 sisters ‘Sea Pecos’ and ‘Sea Tanana’ for around $48.9 mill each in an en bloc deal.

 

Celsius Shipping was reported to have snapped up three 2009-2010-built MRs for $53 mill en bloc, while Cyprus-based M Sea Capital was said to have purchased two 2008-built NORDEN handies for $13 mill, including a two year charter back. 

 

In a sale and leaseback deal, Navios Maritime Acquisition Corp confirmed that it had  completed a $103.2 mill sale and leaseback transaction for three MR2 and two LR1s.

 

The proceeds have been used to refinance $82.4 mill of bank debt.

 

This transaction provides for 28 quarterly payments of $2.3 mill each, plus interest at LIBOR plus 350 bps per annum.

 

Navios Acquisition said it had an obligation to purchase the vessels at the end of the seventh year for $39.7 mill.

 



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