VLCC USGC-China freight up 24% on day, up 53% since COSCO sanctions
Freight rates for US Gulf Coast-loading VLCCs spiked 24% on the day Friday as position lists continued to tighten over the week after US sanctions were imposed on two affiliates of major Chinese shipowner COSCO Shipping Co., leaving charterers scrambling to secure ships for second decade November cargoes.
The cost of taking a VLCC on the 270,000 mt USGC-China route was assessed at lump sum $13 million, up $2.5 million, or 24% day on day, as the market looked at an Occidental Petroleum fixture, wherein they booked the Maran Andromeda with an option for the Maran Capricorn for an Ingleside-Ningbo voyage, loading November 15-20.
Freight for the route has increased almost 53% since September 25, the day before the sanctions.
A number of charterers entered the market looking for a VLCC to make the long-haul voyage east late Thursday, when there were only 2-3 VLCCs in place to cover first-decade November cargoes out of the USGC, a shipbroker said.
US crude exports are not expected to slow following the spike in freight rates as global firmness will prevent Asian-crude buyers from purchasing in other regions, according to S&P Global Platts Analytics. The market is expected to adjust to the higher freight costs to keep the flow of crude moving out of the USGC.
Rate levels for key global VLCC markets showed similar upward movements, with 270,000 Persian Gulf-China freight moving up to w102 and the 260,000 mt West Africa-China route up to w115, up w5 and w20, respectively.
The VLCC market has seen a number of supply-draining events ahead of the COSCO sanctions, including attacks on Saudi oil infrastructure, US sanctions on Iranian-origin crude, and IMO 2020 preparations. Although not all COSCO-owned ships are impacted by the sanctions, charterers have been keen on steering clear of utilizing any of the shipowner’s 40-45 VLCCs.
There were four other VLCCs booked out of the USGC for discharge in China or South Korea late Thursday and early Friday. Hyundai Oilbank placed new-build VLCC, Agios Nikolas on subjects at $12.3 million for a two-port load at East Coast Mexico and the USGC on November 13-17, discharging in South Korea. The ship was taken at an immense discount to typical market levels due to the ship embarking on its maiden voyage, shipping sources said.
Equinor and SK Energy booked VLCCs for USGC-South Korea runs, with Equinor taking the Qamran at $12 million for a November 15-20 laycan, while SK replaced the Maxim with the Pacific M for November 10-14 dates at $12.35 million. Phillips 66 jumpstarted the rate rally, booking the Syfnos, an older ship, for a USGC-China run at lump sum $11.9 million, loading November 15-20.