Markets - Rates under pressure

May 27 2016

Sluggish volumes in the MEG and W Africa, together with less delays in Chinese ports, has lengthened the list of available tonnage.

Charterers were firmly in the driving seat having held back and have managed to force rates down, Fearnleys said in its weekly report.

VLCC earnings out of the two loading areas went down to mid $30,000s per day. There was an increasing feeling of softening undertones throughout the VLCC segment, as we may see the start of the summer market.

Expectations that the softer trend in the Suezmax market would continue proved correct last week, as enquiries remained limited out of W Africa. Excess tonnage supply in combination with the force majeure situation in Nigeria had taken its toll on rates, which have been struggling in the WS50’s for W Africa-UK/Cont/Med voyages.

At time of writing (Wednesday), some activity had created more momentum with a lot of ships getting fixed on subs for private deals done off market. However, for the time being, the enquiries were not enough to firm the market.

Med/Black Sea also saw increased activity with charterers booking Suezmaxes for Aframax cargoes but only to fail the vessels, as the Aframax-rates softened shortly after.

In the North Sea and Baltic rates also came off for both loading areas. This downward correction happened as charterers benefited from more available tonnage to choose from.

By the middle of this week, it seemed the market had bottomed out. However, with the activity slowly growing again, we expect that owners will manage to push rates back up in the short term, Fearnleys said.

Med and Black Sea continued in the same vein as last week with rates spiralling up and down. Suezmaxes, desperately looking for more action elsewhere, went on subs for part cargo Aframax liftings, thus slowing down the firm momentum.

At the same time, date sensitive cargoes had to pay up rate wise, leaving the market a bit disorientated as to which direction it would go. However, now that the dust has settled, we are left with a relatively well balanced market and rates will stabilise at around the WS110-115 level moving into first week of June loading window, Fearnleys concluded.

In the charter market, Glovis was believed to have fixed the 2016-built VLCC ‘Ulysses’ for three years at $35,000 per day.

The 2010-built Aframax ‘Leyla K’ was thought to have been fixed to Mjolner for six months at $22,500 per day, while CCI was said to have fixed the 2016-built LR1 ‘Bluebird’ for 12 months at $18,750 per day.

The 2004-built MR ‘Fidelity’ was reported to be fixed to Nanjing Tankers for 12 months at $16,000 per day, which is softer rate then previously reported for MRs.

In the S&P sector, Frontline was said to have purchased two Chinese-controlled VLCCs for $117.5 mill en bloc. The 2010-built ‘New Coral’ was thought to be valued at $60.2mill, while the 2009-built ‘New Medal’s’ value was put at $57.3 mill.

During February and March, 2016, Centrofin, the charterer of the Teekay LNG-owned Suezmaxes ‘Bermuda Spirit’ and ‘Hamilton Spirit’ , exercised its options under the charter contract to purchase both vessels for around $94 mill in total.

‘Bermuda Spirit’ was sold on 15th April, 2016 and ‘Hamilton Spirit’ was sold on 17th May, 2016. Teekay LNG used most of the proceeds from these sales to repay existing term loans associated with these vessels, the company said.

Another en bloc deal reportedly involved the 2001-2004-built Handysize tankers ‘King Edward’, ‘ King Everest’, ‘King Ernest’ and ‘King Emerald. Brokers said that as yet unknown interests, rumoured to be private equity investors S1 Capital Partners on behalf of Offen Tankers, had snapped the vessels up for $45 mill en bloc.

The 2004-built vessels were said to cost $11.8 mill each, while the older vessel was thought to be priced at $9.8 mill.

Reported leaving the fleet was the 1987-built MR ‘Alba’ thought sold to Pakistani breakers for $291 per ldt.  

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