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Tankers: VLCC Market on the Slide During May

VLCC spot freight rates edged down further in May. Rates were pressured by ample availability, as the tonnage list remained in excess due to limited scrapping and relatively steady new tanker deliveries. As a result, all routes experienced losses, but well below those seen in the previous month, which saw declines of as much as 33% on some routes. Suezmax average spot freight rates also edged lower in May, declining by 7% m-o-m. Limited cargoes and a long tonnage list weighed on Suezmax rates in May, although initial data for June points to a firmer market going forward, led by West African activity. In contrast, the Aframax sector experienced a recovery in May, gaining 18% m-o-m, with increases across all routes except Indonesia-to-East which remained flat.

Clean spot tanker freight rates were 10% lower m-o-m on average in May, but remained slightly above the same month last year. To the East of Suez, clean tanker freight rates were 5% higher in May over the previous month, boosted by strength on the Middle East-to-East route. In the West of Suez, average spot freight rates continued to move lower in May, declining by 24%, with losses seen on all routes.

Spot fixtures

Global fixtures continued to decline in May, averaging almost 10% lower and following a much stronger 33% drop the month before. However, y-t-d, global fixtures have been around 17%, or 3.25 mb/d, higher in the first five months of this year compared to the same period last year due to the exceptionally strong performances seen in February and March of 2019. In comparison, OPEC spot fixtures experienced a slightly stronger 11%, or 1.5 mb/d, decline m-o-m in May, to average 11.7 mb/d. Y-t-d, OPEC fixtures were 13%, or 1.8 mb/d, higher compared to the same period last year.

Fixtures on the Middle East-to-East route averaged 6.83 mb/d in May, broadly unchanged from the previous month and just 4% lower than the same month last year. The Middle East-to-West route experienced an accelerating decline, falling 35% in May, to average 1.15 mb/d and was 47% lower y-o-y. Outside of the Middle East, fixtures averaged 3.69 mb/d in May. This represents a lower m-o-m decline of 19% compared to a 33% drop last month and was down 13% compared to the same month last year.

Sailings and arrivals

OPEC sailings erased the previous month’s gains, declining 1.3%, to average 24.33 mb/d in May. However, this was broadly in line with the level seen last year. Sailings from the Middle East edged up marginally to 17.5 mb/d, but remained about 1% lower compared to the same month in 2018.

Crude arrivals to North America declined by 4%, or 0.5 mb/d, in May after recording strong levels over the previous two months. Y-t-d, arrivals were just 2% higher in the first five months of this year, compared to the same period last year. Arrivals into West Asia were 3%, or 0.1 mb/d, lower m-o-m and were broadly flat compared to the same month last year. In contrast, arrivals into the Far East were sharply higher, gaining 6%, or 0.5 mb/d, in May and were more than 0.2 mb/d higher than the same month last year when arrivals experienced a similar surge. Meanwhile, arrivals into Europe were broadly flat m-o-m, but were 0.2 mb/d lower y-o-y.

Dirty tanker freight rates

Very large crude carriers (VLCCs)
VLCC spot freight rates in May edged down further in May. Rates were pressured by ample availability as the tonnage list remained in excess due to limited scrapping and relatively steady new tanker deliveries. As a result, all routes experienced losses, but well below those seen in the previous month, which saw declines of as much as 33% on some routes. Freight rates registered for tankers operating on the Middle East-to-East route edged down 3% from the previous month to stand at Worldscale (WS) 39 points in May. The Middle East-to-West route experienced a decline of 9% m-o-m to stand at WS19 points, while the West Africa-to-East route slipped by 5% m-o-m to average WS41 points. Compared to the same month last year, VLCC freight rates were 8% lower in May.

Suezmax
Suezmax average spot freight rates also edged lower in May, declining by 7% m-o-m, and were 12% lower compared to the same month last year. The decrease came mainly from tankers operating on the West Africa-to-USGC route, which declined 8% to average WS55 points. The NWE-to-USGC route edged down 2% to average WS50 points. Limited cargoes and a long tonnage list weighed on Suezmax rates in May, although initial data for June points to a firmer market going forward, led by West African activity.

Aframax
The Aframax sector experienced a recovery in May, gaining 18% m-o-m, with increases across all routes except Indonesia-to-East, which remained flat. The Med-to-Med route jumped 30% to average WS103 points, while the Med-NWE route rose 28% to average WS96 points.


The Caribbean-to-US East Coast route gained 15% m-o-m. However, all routes were lower compared to the same month last year, a month which also saw strong gains.

Clean tanker freight rates

Clean spot tanker freight rates were 10% lower m-o-m on average in May, but remained slightly above the same month last year. To the East of Suez, clean tanker freight rates were 5% higher in May over the previous month, boosted by the strength on the Middle East-to-East route that experienced a gain of WS20 points, or 20%, to average WS116 points. In contrast, rates on the Singapore-to-East route edged 6% lower m-o-m to average WS137 points in May.

In the West of Suez, average spot freight rates continued to move lower in May, declining by 24%, with losses seen on all routes. Both the Med-to-Med route and Med-to-NWE routes declined by WS26 points or around 15%. Clean spot freight rates for tankers operating on the NWE-to-USEC route experienced even stronger losses of 24% m-o-m, representing a decline of WS37 points, to average WS117 points.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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