Thursday, May 5, 2016

VLCC chartering activity reaches one-month highs with Middle Eastern fixtures rising by 93% on the week

The VLCC market is on a roll over the course of the past few weeks. In its latest weekly report, shipbroker Charles R. Weber said that “the pace of VLCC chartering was at a one‐month high this week as charterers were busier following last week’s lull. A total of 27 fixtures were reported in the Middle East market (+93% w/w) and seven were reported in the West Africa market (+75%, w/w). Notably, all of this week’s West Africa fixtures were covered on units ballasting from Asia, but despite the corresponding strong level of draws on Middle East availability, rates corrected sharply over the course of the week with the benchmark AG‐FEAST assessment setting a fresh YTD low of ws46 towards the close of the week (which also represents significant erosion from the ws92.5 at which the route commenced April)”, said the shipbroker.

According to C.R. Weber “one factor behind this week’s rate slump is that much of the Middle East market’s inquiry was oriented to the start and the end of the week, leaving a much quieter mid‐week period which negatively impacted sentiment. Another factor behind this week’s rate losses was the fact that charterers were covering nearer forward dates which alleviated some of the uncertainty inherent to normal forward windows amid ongoing operational delays in Asia; as the pool of units in play were already largely undertaking ballasts all were able to be seriously considered for fresh requirements. For their part, supply/demand fundamentals continued to disjoint. We note that with 60 May cargoes covered to date, we anticipate only up to 5 additional cargoes remain uncovered. Against this we note that there are 19 vessels available and even if assuming that draws to service West Africa cargoes remain steady from this week’s level, the implied surplus at mid‐May is 8 units in a low case. Through the end of the second decade of May’s loading program that surplus could rise to 15 (excluding any hidden positions). Given the extent of this week’s rate losses and the fact that while availability levels have expanded they remain manageable at present rates, we expect that rates will stabilize during the upcoming week”.

Middle East

“Rates on the AG‐FEAST route dropped 12 points over the course of the week to a closing assessment of ws48. Corresponding TCE fell 32% to ~$30,134/day. Rates to the USG via the Cape were off by 5.5 points to a closing assessment of ws33.5. Triangulated Westbound trade earnings declined by 10% to ~$59,690/day at present”, said CR Weber. Similarly, in the Atlantic Basin, “rates in the West Africa market continued to follow the direction of those in the Middle East. The WAFR‐FEAST route concluded the week at ws56, off 6.5 points from a week ago. Corresponding TCEs observed a weekly loss of 17% at a closing assessment of ~$40,813/day. The Caribbean market remained slow with the CBS‐ SPORE route holding at the $5.25m level”.


“Chartering activity levels in the West Africa market were largely unchanged this week with a total of 12 fixtures representing a weekly increase of one. Charterers have moved slowly past May’s first decade loading period which has kept stronger activity levels at bay for now but; simultaneously, low VLCC coverage of the month’s program thus far leaves more cargo available to Suezmaxes which should drive demand in the coming weeks. The recognition of this fact has seen owners more resistant to lower rates and the WAFR‐UKC route was steady at ws82.5 while the WAFR‐USAC route eased by a modest 2.5 points on recent strength in the Caribbean likely to maintain limited slower demand levels for the larger tanker which in the coming weeks should see realized Suezmax demand strength. Between potential imminent demand strength and the probability that such will remain when charterers progress into June, rates are likely to remain steady early during the upcoming week with possibly firming thereafter”, said CR Weber.


According to the shipbroker, “the Caribbean Aframax market commenced the week with strong rate gains after surprisingly demand materialized late last week with positive sentiment extending to the start of this week. However, as the week progressed the upward trend subsided once market participants realized that some units reportedly on subjects were either erroneous or had failed, leaving a less tight fundamentals profile. Having reached ws145 on Monday, the CBS‐USG route moderated to the low ws140s at which it remained through the remainder of the week. Sentiment concludes the week slightly soft due to a late‐week demand lull; however, with supply/demand balanced relative to present rates we expect that ws140 will represent a floor early during the start of the upcoming week with no major impetus for positive or negative progression presently evident”.


Finally, “the Caribbean Panamax market was markedly more active this week with a surge of regional fixtures appearing early during the week while some swaps and stronger Aframax rates added to the pressure. As a result, the CBS‐USG routed observed a weekly gain of 15 points to a closing assessment of ws120. Failing a fresh demand surge early during the upcoming week, supply/demand fundamentals appear balanced though some units incoming from the Med and a less hectic pace could see rates moderate from the present high”, said CR Weber.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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