In International Shipping News 19/05/2015
Freight rates for dirty tankers in the East of Suez market have gone up sharply to hit their highest level so far in 2015 last week, amid strong demand to move crude and fuel oil and spike in interest for floating storage, said sources Monday.
The long waiting time in Basrah for ships to load and delays in discharging at South Korea and China due to logistics and weather issues also reduced tonnage supply, contributing to firming rates, sources said.
The VLCC, Suezmax and Aframax rates hit their 2015 highs on Friday, with the key Persian Gulf-Japan VLCC rate assessed at w76, the Persian Gulf-East Suezmax rate at w100 and the Indonesia-Japan Aframax rate at w115. These rates were assessed unchanged Monday.
In the latest fixture heard Monday, the Astro Chloe was placed on subjects by Petronas for June 2 loading on the Basrah to Malacca route, basis 270,000-mt cargoes, at w85 — the highest rate for the Persian Gulf-East route for VLCCs seen so far this year.
A number factors have led to the spike in rates at this time of the year — typically a lean time for dirty tankers when several refining units go for routine maintenance and demand to move crude cargoes ebbs.
Recent gains in crude prices have prompted importers to buy more volumes in anticipation of further increases, which translated to higher demand for ships, market participants said last week.
“Importing countries are buying more crude than needed for immediate refining in order to store at relatively cheaper rates,” said a source with a Japanese refiner.
Reflecting this demand surge, the number of VLCCs bound for Chinese ports have risen by almost 10% in the last one week alone with Saudi Arabia’s crude output at a three-decade high and Iraq’s crude exports on the rise, said a VLCC broker in Singapore.
“Now, add to this an increase in ton-mile demand due to the large volumes lifted from the Atlantic region two weeks ago, a tight tonnage list, some shipping delays and a bullish sentiment of owners, and the gains of last week start making sense,” the broker said.
Ton-mile demand is calculated by multiplying the volume of cargo moved in metric tons by distance traveled in miles. It indicates the average distance a ship covers to deliver every ton of cargo. Covering a longer distance implies diminished availability of ships even if the total size of fleet remains the same or conversely it offsets the increase in supply of tonnage.
These factors have helped to push daily earnings for VLCCs on the Persian Gulf to East routes to around $75,000 last week, compared with less than $5,000 in the same period last year, according to brokers.
SUEZMAX RATES
Suezmax rates for Persian Gulf loadings are also higher due to revival in demand and spillover impact of rising rates in West Africa.
On Friday, one charterer received four offers at around w130 for a May 28-loading cargo on the Persian Gulf to East route, market participants said.
Among fresh fixtures heard Monday the Iskmati Spirit was placed on subjects by Occidental at w55, loading June 1 for a Basrah-US Gulf voyage with an option to take the cargo to Europe at w50, basis 140,000-mt cargoes.
“It is too high to assess the market at w100, I will still call it anywhere between w91.25-w95,” one of the brokers said Monday.
But he added that sentiment was definitely strong, though charterers were trying to resist rising rates.
With the Persian Gulf-West Coast India runs reported fixed around w105, it was unlikely that ships on the Persian Gulf-East route will be hired out in double-digit worldscale rates, sources said Monday.
AFRAMAX RATES
For Aframaxes, rates rebounded sharply last week after hitting their lowest level for 2015.
This is due to demand for ships for making short- and long-haul voyages in the spot market, and for short-term time charters of 60-90 days for storing fuel oil.
With fuel oil prices expected to rise in the next few months, around a dozen Aframaxes were seen taken for floating storage earlier this month, mostly for delivery in Singapore, market participants said.
This in turn has prevented ships from ballasting to the Persian Gulf from Southeast Asia, pushing up rates there as well.
In a fixture last week, the Trident Star was placed on subjects by Mitsui at w125 for May 24 fuel oil loading on the Ruwais to East route, basis 80,000-mt cargoes, brokers said.
However, with lack of fresh demand to store fuel oil, the rates may peak soon, said sources. “Unless there is a fresh injection of cargoes, market in Southeast Asia appears to have reached its apex last week,” an international shipping brokerage said in its daily report on Aframaxes.
Fresh leads on the tanker market outlook are expected at the Enmore Shipping Conference in Beijing on May 28.
