Markets- No respite for owners

Jan 19 2018

With earnings dipping well below $10,000 per day, we have seen a sharp turnaround in sentiment in the VLCC market.

Slightly tighter position lists has given owners an opportunity to start asking for more to compensate for the higher bunker prices. However, earnings were still only in the mid $10,000s per day for the major routes, a far cry from expectations, Fearnleys said in its weekly report. 

January ended with some 136 deals from MEG and, as we embarked into February dates, optimism remained and rates were under upward pressure. Continued high volumes for all the major routes is required for sentiment to be maintained.

The start to 2018 has seen a rough ride for Suezmaxes with earnings down below $3,000 per day for TD20. It is is going to take a lot of hard work to claw back the market to respectable earnings above OPEX.

A combination of factors have contributed to the decline, Fearnleys said. West African grades were very much out of favour with Northwest Europe and Med refineries who have turned to alternatives, including Libya.

There has been a resurgence in exports from the USG with the favourable pricing of WTI crude again negating West Africa grades turning the market on its head. The Black Sea has also seen very limited volume of late. Here the market has plateaued at WS67.5 for TD6. The outlook remains challenging for owners in the weeks ahead, the broker said.

In the Baltic, the end-month cargoes came under some pressure, as owners saw a tight window and held back their ships. They managed to push rates up to three digits, but at the same time North Sea was very quiet, thus creating a two-tier market.

At time of writing (Wednesday), the Baltic had reached the top and faced downward pressure. In the Med and Black Sea, the date in the calendar should mean we are in the midst of a booming market with lots of weather, delays and heavy lifting programmes.

However, this could not be further from the truth, as the list is long, cargoes are few and weather is a bit too stable to kick up a real fuss, Fearnleys concluded. 

In the charter market, brokers reported that Repsol had fixed the newbuilding Suezmax ‘Eagle San Jose’ for around three years at $19,625. Nordic American (NAT) has confirmed that Cepsa had fixed the 2004-built Suezmax ‘Nordic Castor’ for 15 months, plus options, although no rate was revealed. 

The 2010-built LR1 ‘Hafnia Australia’ was reported fixed to Galana for 12 months at $14,500 per day, while Koch reportedly took the 2007-built LR1 ‘Polar Cod’ for four to eight months at $13,500 per day.

In the MR segment, Trafigura was said to have fixed the 2006-built ‘Arctic Bay’ for 12months at $14,000 per day. Dong-A was believed to have fixed the 2009-built ‘Maetiga’ for 12 months at $13,200 per day, while Shell was thought to have taken the same vessel for 30 to 90 days at $11,500 per day.

Elsewhere, COSCO Shipping Energy Transportation (CSET) has signed a co-operation agreement on tanker shipments with Sinochem Oil, a subsidiary of Sinochem Corp.

The deal, signed on 11th January, will see CSET charter in five VLCCs from Sinochem Shipping.

In a statement, CSET said that this move was in line with its ambition to bolster its VLCC capacity and deepen co-operation with Sinochem.

COSCO’s tanker arm has ordered several vessels recently, from Panamaxes to VLCCs.

In the newbuilding market, Kyklades was reported to have declared two VLCC options at HHI for around $81 mill each for 2H20 delivery. Chios was reported to have ordered an MR at Hyundai Mipo for 1H19 delivery.

As for the S&P sector, brokers reported that the 2003 built Aframax ‘Vega Voyager’ had been sold to Target Marine for $10.8 mill. The deal included a period charter to PDVSA.

Other Greek interests were said to have acquired the LR1 sisters ‘King Darius’ and ‘King Duncan’ for $28 mill en bloc. Another LR1, the 2003-built ‘Energy Century’ was said to have been taken by Singapore interests for $9.5 mill.

****The Suez Canal Authority (SCA) has reduced certain tanker tolls.

In a circular, the SCA stated that :

1) Crude oil tankers coming from ports of the US Gulf, Caribbean area heading to:

a) Ports West of Indian sub-continent, starting from Karachi to Cochin shall be granted a reduction of 45% of the Suez Canal normal tolls.

b) Ports located East of Cochin shall be granted a reduction of 75% of Suez Canal normal tolls.

2) Crude oil tankers coming from ports of Latin America, starting from Colombia (San Andres Island) and its southern ports heading to:

a) Ports West of Indian sub-continent, starting from Karachi to Cochin shall be granted reduction of 65% of the Suez Canal normal tolls.

b) Ports located east of Cochin shall be granted a reduction of 75% of Suez Canal normal tolls.

****The UAE has announced a clampdown on tankers of over 25 years of age calling at UAE ports.

In addition, every tanker must be of double hull construction, classed with an IACS society or TASNEEF, the local registry. 

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