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2011 ends with tanker owners in distress

Tuesday, 27 December 2011 | 00:00
It's been said already, but it's worth pointing out that if 2010 was indeed difficult for tanker owners, 2011 could very well be regarded as even more challenging. According to the latest report from London-based shipbroker Gibson, "the steady supply of new tonnage entering the fleet contributed to the dramatic fall in earnings particularly for the crude carriers. Deliveries of VLCCs averaged just over one a week (58) while a similar picture was apparent for the Suezmaxes (44 deliveries). With almost all single-hull tonnage out of the tanker market, this year is closing with first generation double-hulls finding trading conditions increasingly tougher as some charterers show a preference for younger tankers" said Gibson.
The shipbroker said that "we are beginning to see teenage VLCCs being sold for demolition as asset values for 15 year old units gets closer to the scrap price. Thankfully, we have seen a dramatic fall in tanker ordering, especially for crude carriers although there are several cash rich owners waiting to pounce as asset prices continue to fall. Increases in the oil price have also elevated bunkers prices by about a third since December last year, forcing owners to be more creative with speed and consumption as some owners opt for slow steaming. With owners under considerable financial pressure, several companies have had to restructure finance and debt and a couple of US stock market companies have been forced to file for Chapter 11 to protect themselves from bankruptcy.
With very little floating storage in play (other than Iranian) the tanker market was more influenced by political events, in particular Libya. The loss of 1.6 million b/d of Libyan light sweet crude with 80% destined for European refineries meant that those replacement cargoes had to be sourced from outside the region. The tragic events following the Japanese tsunami drastically reduced demand as a consequence of the closure of refineries for safety checks. Rates plummeted in March for the VLCCs and even fell into negative earnings in the third quarter. China’s demand for crude continues to support the tanker market and oil demand continues to rise. However, tanker owners (& banks) need faster economic growth than current predictions to absorb new tonnage" Gibson concluded.
Meanwhile, in the tanker markets this week, as Paris-based shipbroker Barry Rogliano Salles (BRS) put it, "the end of the year did not bring any light to VLCC owners as it punctually did for owners of smaller units… Despite a well maintained monthly volume of cargoes from the Middle East Gulf, rates keep dragging at low and stable levels. Voyages to the Far East seem unable to even reach a mere WS60 and have again averaged WS57.5 all week long. At such level, daily returns are hardly fetching USD12,000 quite far from the minimum required for such modern and expensive units to run and be well maintained. Since this situation should continue next year, most ships are now performing voyages at maximum 13 knots. We therefore shall modify our daily return calculator from early next year so to be more in line with reality. In comparison, activity in the western hemisphere is ending the year on a high tone with a positive combination of cargoes from West Africa and fuel from Northern Europe. Voyages WAfr/USG gained 7.5 points at WS67.5 equivalent to nearly USD25,000/day while fuel cargoes from NW Europe to Singapore averaged USD4.25 m. (+ 0.3 m.)" said BRS.
On the Suezmax front, it mentioned that "despite quite a busy week on the West African Suezmax market, rates remained pretty unchanged thanks to a good equilibrium between supply and offer. Freights registered this week vary between WS85 and WS90 (depending on the route) which still means about USD20,000/day as a t/c equivalent. It has been quite a different story ex Black Sea(!): for the last two weeks, the market has been getting influenced by the winter season and Turkish straits delays which quickly increased to nearly 10 days northbound. The market is under heavy pressure and reached a top on Thursday when Black Sea/Med has been fixed at WS120 for mid Jan loading. Such a high score brings time charter equivalents well above USD40,000 per day … but for how long?" wondered BRS in its report.
Finally, "the Aframax market had an amazing week… Increasing delays to the Black Sea and a fair amount of pre-Christmas fixing pushed rates heavily up. December cross-Med stems remain extremely difficult to cover even though a high number of replacements failed. Black Sea cargoes have already been fixed well into January and natural dates should pay around WS160 (above USD30,000 per day). Hard to say how long it will last but the likely quiet holiday period will halt the activity. The North markets have been reasonably busy this week on the back of pre-holiday fixing, with most of the action happening in the Baltic though.
Nevertheless, owners didn't manage to push rates up significantly. 80,000t currently can be rated at WS130 level, while 100,000t ex Baltic pays WS97.5. The Caribbean recovery did not last long and local voyages are now back to about WS115 (-15 pts) while, in the Middle East Gulf, marginal improvements are registered with rates finally reaching WS120" BRS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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