In Hellenic Shipping News 13/12/2016
Demand for VLCC crude cargoes has triggered an increase in freight rates over the course of the past week, while the trend is seen higher over the next few days as well. In its latest weekly report, shipbroker Charles R. Weber said that “VLCC rates were stronger this week on relatively steady elevated demand in the Middle East market and a fresh demand gain in the West Africa market. Compounding the impact of strong demand, the earlier high availability of disadvantaged units was largely cleared out by the start of the week, taking away the discounted options which charterers had been focused on to keep rates from advancing. A total of 37 fixtures materialized in the Middle East market (‐2, w/w) and 7 materialized in the West Africa market (+1, w/w).
Meanwhile, as CR Weber pointed out “sentiment remains bullish given a very balanced forward supply/demand fundamental in the Middle East where, subject to the extent of remaining cargoes and draws on remaining vessels to service West Africa demand, the month appears to have a high potential to conclude with no surplus units. If this occurs, it would mark the first time in nine months that no surplus units remain – and only the second such occurrence since 2008. Factors which could place the end‐month surplus above this level include a deviation from what we believe is a conservative estimate of West Africa draws (four units through the remainder of the December Middle East program), given that two of this week’s West Africa demand was sourced on units ballasting from the USG – and the fact that charterers have recently reached forward to end‐December dates which could imply that remaining Middle East cargoes could be lower than our target of 134 cargoes. To date, 123 cargoes have materialized. Additionally, hidden units and potential charterer relets could expand available units. Our high case of surplus units, however, is five – which would remain the lowest surplus count since March. In either the base or high case of supply, the fundamentals are tight and rates are poised to post strong during the upcoming week”, said the shipbroker.
According to CR Weber’s report, in the Middle East, “rates to the Far East gained 10 points to conclude at ws82.5 with corresponding TCEs rising by 20% to ~$61,039/day. Rates to the USG via the Cape gained 2 points to conclude at ws43. Triangulated Westbound trade earnings rose 14% to $57,907/day. Similarly, in the Atlantic Basin market, “the West Africa market followed the Middle East with rates on the WAFR‐FEAST route adding 7.5 points to conclude at ws77.5. TCEs on the route rose by 14% to conclude at ~$57,250/day. The Caribbean market remained quiet this week but as the economics for units freeing on the USG started to favor ballasting to West Africa as opposed to the Caribbean, regional rates improved. The CBS‐SPORE route jumped $300k to a seven‐month high of $4.80m lump sum (representing the strongest weekly gain in over two months)”, said CR Weber.
Additionally, “the West Africa Suezmax market was busy this week as charterers progressed more aggressively into the December program. This tightened regional availability, leading to a rebound of regional rates, which began the week with an extending of last week’s decline. A total of 15 fixtures were reported, representing a 50% w/w gain. Contributing to the narrower supply/demand position is a sustaining of elevated Suezmax demand in the Middle East market, which has reduced ballasts into the West Africa market, and recent Aframax rate strength in European markets where Suezmaxes can compete. Rates on the WAFR‐UKC route gained 5 points from last week’s closing assessment to ws92.5, having dipped earlier during the week to a low of ws70. Remaining cargo volumes from the West Africa market appear limited given both high VLCC and Suezmax coverage to‐date while availability for late‐ December dates appears slightly looser than earlier date ranges; this could imply that further rate upside is limited, though the timing of inquiry for remaining December cargoes and progression into early January dates will likely guide the upcoming week’s rate direction”, concluded CR Weber.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
