Early Month Activity the Hope for a VLCC Rebound
The freight market for VLCCs has continued to remain unimpressive. According to the latest weekly report from shipbroker Gibson, there was “no improvement for previously sliding VLCCs….a slow week as Charterer’s proceeded to gently close out the April programme and had to wait upon May schedule confirmations. Availability remained abundant, and rates slipped further to under ws 40 East for the most modern units, with rates to the West into the high ‘teens. It could get busier next week but even if it does it seems unlikely that any pinch points will develop to allow for a positive market U-turn. Suezmaxes started brightly with early replacement needs adding additional support – rates stepped up to as high as ws 40 to the West and to ws 70 to the East but then interest slowed and Owners moved back onto the defensive with some rate erosion anticipated. Aframaxes had been expected to add a little rate fat and the market did indeed gain to 80,000 by ws 90 to Singapore on solid demand and the improvement should hold for a little while yet – maybe a touch better than that, even”, said the shipbroker.
In a separate weekly note, Affinity Research added that “in the world of VLCCs, cargoes are closing for April’s last decade on a fairly quiet note, fostering a hope that next week will show a promise of early-month activity. Rates have crawled back up to the mid WS40s after plummeting into the high WS20s a few weeks ago for MEG-CHI. However, with little activity being reported in the Atlantic and Arabian Gulf, rates are still slipping, taking shipowners’ confidence down with it. Owners also face rough seas ahead with Suezmaxes, with TD20 and TD6 rates creeping back down. We are seeing a reduction in strait delays, alongside limited cargo outstanding for fixtures in April’s third decade in West Africa. With market base levels on the horizon, owners are faced with the dilemma of whether to accept what is on offer”.
On the Panamax market front Affinity Research commented that “similarly, Panamax fixtures have been unfortunately quiet, with many owners who have even secured cargos this week having needed to wait for a few weeks for the opportunity to do so. Frankly, Panamaxes’ current rate of WS 100 is hanging on a thread, with potential of dropping. It doesn’t help that stateside traders are rolling in local feedstock at present. Transatlantic arbitrage is not expected to pick up until stateside local consumption and local production of oil drops. With summer, and thus a reduced demand for oil, fast approaching, this doesn’t seem to be anytime soon. Mediterranean and Black Sea Afra markets, in similar tone, remain flat. This comes even with a good amount of vessels held up in Trieste and Turkish straits closures. Those vessels which are being fixed are very much part of the lucky few, and offering positive TCE returns. With a weak outlook, any addition to current activity will be an improvement”.
“On a more positive note, though, we count thirteen Aframax/LR2s sold for scrap during the first quarter of the year. This comes alongside another fourteen VLCCs for scrap as well. The North Sea and Baltic markets, on the other hand, have landed some action, with decent amounts of fixing and tightening tonnage raising rates up. With various uncertain positions, mainly due to on board cargoes with no prospects, and few positions rolling round to open Baltic Short/Scandinavia, owners have managed to push the market up by about 15WS points. Meanwhile, MRs have been experiencing a trend of trumping LR1s and LR2s, with a reduction in fleet growth and intra-regional trading working in its favour. However, in the short term, growth in this fleet is expected to slow, particularly given its strong trend of demolitions. LR1s and LR2s are also seeing a confident increase”, Affinity Research concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide