January 29 th, 2010
So far at least, the VLCC market seems less affected than the smaller sizes: activity is holding up well globally and owners have shown good resistance. After having dropped to WS110 in the early part of the week, voyages to the Far East ended the period closer to WS120, with daily returns still fetching US$80,000. With a short month and the Chinese New Year coming up, one can wonder if demand will permit this situation to continue. With about 65 ships still available by end February and already 55 fixtures concluded for this month, the prospects are uncertain. Activity to the west remained limited, with rates finishing at WS70 but daily returns still above US$40,000. The Atlantic basin is becoming heavily affected by the current slump in the Suezmax segment. Although rates for West Africa to the USG are still being estimated in the mid WS90s, similar rates are now being achieved on the smaller sizes, and the ‘spread’ between the two sizes is now such that next rates can only go in one direction… Having seen much of the market gains disappear last week, Suezmax owners faced further’bad news’ this week. Market levels in west Africa dropped from the WS125 level and have now dipped below the WS100 bar. With this year’s new flat rates, WS90 on WAFR/USG round voyage, daily returns are below the US$20,000 mark. Not exactly what owners had in mind when they ushered in the New Year at the WS175 level!! On the back of this drop, a number of cargoes are being traded and it appears rates could go sideways over the next week. Similar to west Africa, the Black Sea/Med market for Suezmaxes saw rates fall as well. To finish the week, a number of fixtures at WS105/110 were concluded for cross-Med and Black Sea/Med voyages, with returns however still around US$30,000 per day. Also not helping the market, delays through the Turkish straits have declined to approximately 5 days northbound and similar southbound. It was not a very positive week in the Aframax segment. The Mediterranean and north European markets were rather silent on the crude trade but particularly busy with fuel cargoes going east. This lack of usual cross-Med activity made rates soften through the week to WS100 (hardly US$10,000/day) with a 10 point premium for cargoes ex Black Sea. The ‘WS100’ figure seems to be the psychological limit owners will not cross for fear of jeopardising their running costs. Unfortunately this may not last long if activity does not pick up soon. The trend was even worse for cross North Sea and Baltic/UKC, which both lost about 30 points through the week, ending respectively at WS125 and WS110 (around US$20,000/day). The same penalties were inflicted on the east of Suez and Caribbean markets due to similar oversupply. In both zones rates came down by a couple points, and Caribs/USG is now fixing at WS152.5 (around US$23,500/ day) and Kuwait/Singapore at WS137.5 (around US$18,500/day). The East of Suez market was interesting this week: activity saw a relative bounce and a positive momentum may be building up which will hopefully be sustained next week. The LR market had a good start with quite a few promising cargoes, although activity during the rest of the week proved disappointing. There were a few longhauls fixed but not much else. However the limited amount of ships has kept rates stable, and 75,000 t naphtha MEG/Japan is being called at WS145 levels, while 55,000 t naphtha MEG/Japan fixed at WS155 levels. Activity this week in the MR market was substantial enough to keep most well-approved ships busy, plus a significant chunk of the other less well-approved ones. This has created a 7-10 day period in February when the scarcity of ships could push rates up, and they should be firm throughout next week. Cross MEG is now being fixed at lumpsum US$180,000 and 35,000 t MEG/East Africa naphtha is going for WS250. The west run rose to lumpsum US$1.4m for 40,000 t jet, while the eastern MEG/Japan run has a price revolving around WS160. We should see a very tight market next week with a similar amount of cargoes but a shorter position list. Rates will undoubtedly increase, although it is premature to talk about market change. Globally there was less demand in the Med this week, with most of the fresh cargoes being in a forward position. Freight rates remained steady and firm and showed no sign of weakening. This is mainly due to the very bad weather throughout the whole area, which has caused many delays blocking numerous ships waiting to discharge. Several difficult replacement cargoes were on the market due to this. When the weather improves – and unless demand picks up – we may witness freight rates falling in the short term. At the moment freights are at WS230 for cross-Med and WS245/250 for Black Sea/Med basis 30,000 t.The NWE market was plagued by ships fixing and failing, which drove down the rates throughout the week. The MRs felt a softening, which was represented in a WS10 point drop week-on-week. The market has settled at WS190 basis 37,000 t. For West Africa we saw quite a bit of enquiry this week, but notwithstanding rates still softened to WS210 basis 33,000 t on the back of slow MR activity. Cross-UK/C vessels fixed and failed at WS240 basis 30,000 t and WS280 basis 22,000 t and with the ice ex Baltic the market remains date sensitive.