Markets - VLCCs await BOT nominations

Jul 14 2017

VLCCs saw more activity and increasing rates ex MEG during the end last week.

However, disappointingly for owners, activity dwindled in the past few days, due to less demand in the spot market, Fearnleys reported.

The market needs to see more action to avoid rate levels starting to ease off again. Owners are hoping that the soon to be released BOT stem nominations will support them, but on the other hand, the supply situation looks ample.

For charterers, it was a game of patience in the Suezmax market. Throughout last week, there was sustained pressure from key owners driving a bullish sentiment, due to tightening lists reflecting some pressure on fundamentals, especially in West Africa with increased volumes of cargo steadily eroding tonnage.

Finally, one by one owners realised that there was very little to support any rate upward movement and by the end of last week, stability had returned with last done levels being achieved at WS65 for TD 20, as the market found a balance.

The Med and Black Sea saw limited enquiry and stability has also prevailed with TD6 going sideways at WS75.

This week has started on a quieter note with first decade of August dates in West Africa being lighter than last month. The trend going forward is stable and time will tell if charterers can find a way to squeeze owners further.

North Sea and Baltic kept moving sideways at bottom levels, as charterers fixed further forward than has been seen recently. The tonnage list is thinning out, but nevertheless, we expect rates to stay unchanged and the week to end on a quiet note.

In the Med and Black Sea, owners finally saw some positive market signs. High cargo activity last week thinned out what seemed to be an endless tonnage list, and as a result, owners are now pushing for higher numbers.

At the time of writing (Wednesday) WS80 was the going rate, but as we have fixed far forward, and there still are some prompt ships left on the list, we do not expect rates to go much further for the time being, Fearnleys concluded.

Turning to Asian product tanker trades, Ocean Freight Exchange (OFE) said while this segment may not be as dire as the crude tanker sector, newbuilding deliveries are expected to continue to keep a lid on product tanker rates in Asia over the third quarter of this year.

The pace of deliveries is expected to pick up in 2H17, bringing the net fleet growth this year to 3-4%. Around 30% of the expected LR2 newbuilding deliveries and 25% of expected LR1 deliveries this year have already entered service.

On the demand side, higher June and July naphtha inflows from the West on the back of a wide East/West spread have led to a build-up in buyers’ inventories. As such, this is likely to displace some flows into Asia, resulting in less movements along the benchmark AG/Japan route and further pressuring LR rates in 3Q17, OFE said.

According to Platts, around 1.2 - 1.3 mill tonnes of European naphtha is expected to arrive in Asia in July (flat month-on-month), almost 20% higher than the year-to-date monthly average of 1.02 mill tonnes.  

Moreover, while North Asian naphtha import volumes are relatively steady, naphtha imports into China have been dropping steadily, due to increased domestic output. Chinese naphtha imports during January - May were down by 22.2% year-on-year to 154,000 barrels per day, and are expected to continue easing over 3Q17.

The strength in the Asian gasoil market has led to a persistently strong EFS, which has kept the East/West arb closed this year, resulting in less LRs moving along the key AG/Europe routes. This is expected to continue to weigh on the Asian LR market in the third quarter.

Things look a little brighter for the Asian MR segment, which has recently rebounded from multi-year lows.  Chinese product exports in 3Q17 are likely to be supported by the recent release of the third batch of fuel export quotas, the conclusion of the refinery maintenance season, as well as lower domestic demand for gasoil, due to a nationwide fishing ban.

The third batch of fuel export quotas (under both processing trade and general trade terms) stand at 15.4 mill tonnes, which is 231% higher than the previous batch and 152% higher year-on-year.

This leaves much room for exports to grow in the third quarter, which could help to keep a floor under MR rates, OFE concluded.

TOP Ships announced this week that it had entered into two joint venture agreements, on a 50:50 basis, with trading house Gunvor Group for two 50,000 dwt product tankers ‘Eco Holmby Hills’ and ‘Eco Palm Springs’, currently under construction at Hyundai with expected deliveries in the first and second quarters of 2018, respectively.

The company had previously announced that it had acquired 49% of each vessel and prior to entering into the joint ventures, increased its shareholding to 50%.

Top Ships also announced that upon their delivery from Hyundai, they will enter into timecharter employment with Clearlake Shipping, a subsidiary of Gunvor for three years firm, plus two additional optional years.

The total potential gross revenue backlog from these contracts is estimated to be about $55 mill.

Company CEO, Evangelos Pistiolis, commented: “The joint ventures with Gunvor Group represent a major milestone for Top Ships and we expect that this partnership will create a lot of synergies that will be beneficial for both parties.”

Odfjell confirmed that the transaction to acquire five stainless steel newbuildings and its intention to form a pool of 15 x 25,000 dwt vessels has been completed. 

The first vessel will be delivered on 14th July, 2017 and the remaining four newbuildings will be delivered intermittently to May, 2018.

Odfjell said that the five wholly-owned newbuildings and the formation of the pool are expected to have a positive contribution on its returns and will strengthen its position and competitiveness in the current state of the chemical tanker market.

In the charter market, brokers reported that the 2003-built VLCC ‘Voyager 1’ had been fixed to Shell for three months at $19,000 per day with an option for a further six months at $20,000 per day.

Trafigura was said to have fixed the 2007-built VLCC ‘Gener8 Atlas’ for one to two months at $23,000 per day.

In the MR segment, Cargill was believed to have taken the 2012-built ‘Miss Benedetta’ for two to five months at $13,500 per day, while Navig8 Product Tankers was thought to have fixed the 2009-built sisters ‘Navig8 Strength’ and ‘Navig8 Success’ for 12 months at $11,500 per day each with options for a further 12 months at $13,500 per day.

Turning to S&P deals, the 2003-built Aframax ‘Amba Bhavanee’ was sold at auction for $5.6 mill. The vessel is out of class and has been idle at Aruba since 2013.

Another Aframax, the 2003-built ‘Gener8 Pericles’ was thought committed to Far East interests at $11.7 mill.

The1998-built MR ‘Maritime Yuan’ was said to have been sold to undisclosed interests for $4.5 mill, while the 2002-built MR ‘Jenny’ was reportedly sold to Indian interests for $10 mill with her special survey passed.

The 2002-built Handysize ‘Acquaviva’ was sold for $9.5 mill to Nigerian interests identified as Matrix, while the 2004-built Handysize was thought sold to Indonesian interests for $10.8 mill.

Leaving the fleet were the 1993-built VLCCs ‘Aura’ and ‘Bright’ said to have been sold for $330 per ldt each to unknown breakers on the basis of ‘as is’ Khor Fakkan.

The 1997-built Suezmax ‘Blue Trader’ was thought sold to Bangladesh breakers for $378 per ldt on the basis of ‘as is’ Singapore.

Finally, in the newbuilding sector, Central Shipping ordered two, option two LR2s at Hanjin for $50 mill each. The high price was said to be down to their very high specifications. They are due to be delivered in 2019.

Daewoo Shipbuilding & Marine Engineering is to build another four VLCCs for Maran Tankers Management, according to Yonhap News.

DSME will deliver the 318,000 dwt vessels by 20th August, 2019, the shipbuilder said in a regulatory filing, the news agency said.  

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