Markets - MEG VLCCs rates peaked

Nov 11 2016

After the rush of activity last week, the market appeared to have peaked as MEG activity slowed.

The November loading programme is almost finished with only a handful of cargoes possibly left for the very end of the month, Fearnleys reported.

Charterers were in no rush to fix their requirements and those that are trying to conclude business are attempting to shave off last done levels.

Most were waiting for the BOT stem confirmations, due at the end this week and volumes in the first decade will probably determining the market’s further direction.

The Atlantic remained steady, with vessels being fixed ex West Africa, UK/Cont and Caribs at basically last done levels.

Suezmaxes trading in West Africa experienced another week of weaker sentiment and more available tonnage was added to the list.

The recent attacks on the Forcados pipeline, in combination with the already difficult supply situation in Nigeria, did not help rates in the area.

In addition, the Med/Black Sea Suezmax list of available ships grew longer last week and with few cargoes left to cover in the 3rd decade and Turkish straits delays at a minimum, rates softened.

Aframaxes in the North Sea and Baltic experienced a sudden upswing in rates. This firm momentum will continue into 3rd decade November, due to a very tight tonnage list.

Both North Sea and Baltic cargoes were seeking the same vessels and this, coupled with a continued floating storage scenario, added to the upward pressure on rates.

In line with their northern counterparts, the Med and Black Sea are gearing up for a rate party, Fearnleys said.

The firmer market started with tonnage ballasting north and transatlantic for better returns, resulting in a day of high activity with 19 ships fixed on subs.

The first major hike was a WS7.5 point rise from last done ex Black Sea. However, at the time of writing (Wednesday), another rate boost was on the cards and a jump of a minimum of WS15 points by the end of this week, is probable, Fearnleys concluded.

In other chartering news, Teekay Offshore has signed a new three-year firm shuttle tanker contract of affreighment (CoA) with BP for North Sea operations.

BP is the operator of the new FPSO ‘Glen Lyon’, which will be positioned on the redeveloped Schiehallion oil field, west of Shetland in the UK sector of the North Sea.

A consortium called Schiehallion co-venturers, consisting of BP, Shell and OMV Group, is the owner of the new FPSO and the Schiehallion and Loyal fields.

Once fully operational, the ‘Glen Lyon’ FPSO will have a production capacity of up to 130,000 barrels per day with storage capacity of up to 800,000 barrels. The overall volumes expected to be lifted equal to 50-70 round trip voyages per year.

The three-year contract, plus extension options, is expected to commence in the first quarter of 2017 and is estimated to keep two vessels from Teekay Offshore’s existing North Sea shuttle tanker fleet fully utilised.

“These contracts further enhance our CoA contract portfolio and are expected to add future cash flow through higher shuttle tanker fleet utilisation without the need for incremental capital expenditures,” said Peter Evensen, Teekay’s outgoing president and CEO.

Meanwhile, brokers have reported that Trafigura had fixed the 1999-built VLCC ‘Ashna’ for three, option three months at $34,000 per day.

The 2008-built MRs ‘Hellas Explorer’ and ‘Hellas Enterprise’ were believed fixed for $11,500 per day each for six months, plus an option for a further six months, at $12,250 per day.  

Another MR, the 2006-built ‘Advance II’ was reported as relet to Maersk for six months at $12,500per day.

Newbuilding order continued to trickle in. Among the latest reported was Vision Shipping’s contract at Sungdong for one, option one, LR2 for around $45 mill.

Japanese interests were believed to have ordered two LR1s at Tsuneishi for 2018-2019 deliveries. Not other details were available.

Furetank and Älvtank have extend their orders for intermediate product/chemical tankers fitted with LNG propulsion units by one each at Avic Dingheng Shipbuilding. The latest vessels will be delivered during 2018/2019.

Together with the previous order, Gothia Tanker Alliance now has six tankers on order - Furetank has three, Älvtank two and Thun Tankers one vessel.      

The vessels will be commercially managed by Furetank Chartering in the Gothia Tanker Alliance. 

In the S&P market, Ship Finance has confirmed the sale of the 1998-built VLCC ‘Front Century’ to Hong Kong Chinese interests, identified at Kunlun, for $18.7 mill probably for conversion purposes and has cancelled the charter with Frontline.

The charter is due to terminate in the first quarter of next year and Frontline has agreed a compensation payment to Ship Finance of about $4 mill for the charter’s termination.

"Fleet renewal is an important part of Frontline's long-term strategy, due to the fact that older vessels are becoming increasingly difficult to trade," explained Robert Hvide Macleod, Frontline Management CEO.

Following this transaction, the number of vessels on charter from Ship Finance will be reduced to 12 vessels, including 10 VLCCs and two Suezmaxes.

In other news, brokers reported that the 2000-built Aframax ‘Seafaith II’ had been sold to Indonesian interests for $12 mill.

Great Eastern was said to have purchased two 2011-2012 Aframaxes - ‘Phoenix Beacon’ and ‘Phoenix Concord’.

Chilean interests were thought to have purchased the Ice Class 1A LR1 ‘Ice Base’ for $18 mill, while Middle East buyers were thought to be behind the purchase of the 1994-built Handysize ‘Santrina’ for $5.2 mill.


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