In Hellenic Shipping News 12/05/2015
Despite a slow start to the week, the VLCC tanker market managed to finish the week strong, with the upward trend, expected to “spill over” to the current week as well. According to the latest weekly report from shipbroker Charles R. Weber, “the VLCC market commenced the week softer with public holidays in several markets on both sides of the weekend impacting demand levels and leading to rate losses. The downside was exacerbated by the presence of a number of disadvantaged, second-tier tonnage – including those with limited approvals, recently ex-dry dock, etc. – which traded at sub-market levels and adversely affected sentiment” said the shipbroker.
However, as CR Weber noted, “with activity gaining traction from mid-week and the number of fixtures recorded in the West Africa market rising to their highest weekly level since 2011 as charterers moved aggressively on the region’s early-June cargoes, fresh upward pressure materialized. By the close of the week, the list of second-tier tonnage had been worked through entirely and with only more competitive units remaining owners succeeded at almost fully paring the earlier rate losses. The AG-FEAST benchmark route, which had concluded last week at ws62.5 and dropped into the low ws50s ultimately concluded the week at ws61.5. In assessing fundamentals, we note that 89 May Middle East cargoes have been covered to date, leaving an estimated 25 remaining. Against this, there are 35 units available through end-May dates. Draws from the West Africa market should be more muted going forward as the first decade of that region’s June program likely has 1-3 VLCC stems remaining that will be covered during the upcoming week and draw from May Middle East positions. The implied Middle East surplus is thus 7-9 units, which is in-line with the observed YTD end-month surplus of 8 units. Accordingly, we believe that this week’s late rate gains, which have elevated the AG- FEAST TCE to a closing assessment of ~$57,759/day, have recovered the market to levels suggested by the supply/demand equation. Very modest further rate gains could materialize early during the upcoming week due to the prevailing strong sentiment and remaining May activity but substantial further near*term gains appear unlikely” the shipbroker concluded.
In the Suezmax segment, CR Weber said that “demand in the West Africa Suezmax market was stronger this week the fixture tally rising 30% w/w to 13 as charterers worked end?May cargoes left uncovered by earlier VLCC activity. A number of unsold May cargoes combined with a force majeure at Forcados due leaks on the Trans Forcados pipeline, however, prevented stronger expected chartering demand gains from materializing. Together with a softer Black Sea market, where Russian exports were thinner due to the return of Russian refineries from maintenance, overall rate sentiment was sour. Rates on the WAFR?UKC route shed 2.5 points to conclude at ws72.5. BSEA-MED rates lost 7.5 points to conclude at ws75. Given that BSEA-MED TCE earnings remain relatively strong – presently ~$39,342/day (partly due to heavily discounted bunker prices at Novorossiysk ) compared with ~$25,657/day on the WAFR-UKC route – the impact on the West Africa market should be muted. During the upcoming week, rates should remain stable as charterers work any remaining May cargoes; thereafter, however, the first decade of the June program has been more active for VLCCs on strong Asian demand with the larger tankers already having observed a 9% increase m/m, thereby reducing support for Suezmaxes when charterers move into June dates”.
Finally, in the Aframax market, “rates in the Caribbean Aframax market bounced off of earlier lows this week as regional demand rose to a six-week high of 17 fixtures (+67% w/w). The demand gains were driven by stronger USG-area heavy crude imports, in line with PADD 3 refinery utilization rate hikes – as well as a number of crude export and re?export cargoes from the USG bound for points in Canada and Europe. The CBS-USG route gained 5 points to conclude at ws102.5. Position lists show an ample number of available units relative to demand, however, which limited further gains this week. Early during the upcoming week, rates should remain stable early on due to the appearance of additional available units. Thereafter, demand appears likely to remain strong which could support further gains from mid-week, particularly if Aframax-sized cargoes from ECMex start to reemerge. Panamax Rates in the Caribbean Panamax market were softer this week due to the reappearance of units on position lists from earlier voyages and a sustained demand lull”, CR Weber concluded.
