In Hellenic Shipping News 08/06/2015
The tanker market doesn’t need much more boost in terms of demand to hold its ground. However, the looming change of the world’s most important transit locations, the Panama Canal and the Suez Canal, could alter things. After all, over the course of the coming months, the latest canal expansion projects are about to be completed. According to the latest weekly report from shipbroker Gibson, the first project to be up and running will be the new Suez Canal waterway which, according to recent reports, will be finalised by July this year, a month ahead of schedule.
The London-based shipbroker noted that “a one year deadline from August 2014 had been set to complete the 45 mile (72Km) long parallel waterway which will allow twoway traffic in part of the canal, reducing transit and waiting times. Southbound transit times will be reduced to 11 hours, down from the current 18 and will in the long term allow an increase in canal traffic. The Suez Canal Authority’s own figures claim they will increase transits to 97 by 2023 (up from 49 today). The waterway, however, won’t be deepened to allow fully-laden VLCC to transit without lightering into the SUMED pipeline”.
Gibson added that “these latest developments will provide little support to the tanker market directly, however, with the anticipation of larger volumes of product trade out of the Middle East Gulf and India, faster movement of traffic will help to alleviate potential bottlenecks. In 2014, 16% of all transits were by tankers. The canal currently handles 7% of all global sea-borne transportation and the new channel is designed to compete with the enlarged Panama Canal”.
According to the shipbroker, “in contrast tankers transiting the Panama Canal amounts to just 5% of all passages last year. The last of the new locks gates have been delivered and, following testing, the latest scheduled date for project completion is April 2016. The Panama Canal Authority is targeting the container and car carrier markets as customers. For the tanker market the physical dimensions of the new locks prohibit anything larger than a Suezmax to be able to transit. However, the economics of taking a Suezmax through the canal to discharge in the Far-East given the distance and the transit fees, will make all but a few destinations prohibitive and only then for Caribbean crude. The products market could benefit from the canal with US exports to the West coast of South America from the US Gulf providing the new wider beam LR1s with another outlet to trade”.
Gibson added that “finally, another story circulating recently has been the revival of the idea of building the Kra Canal through Thailand to enable shipping to bypass the narrow Straits of Malacca. The plan would be to build a 750 mile (1,200Km) canal at an estimated cost of $28 billion, which would provide greater security over the current supply chain. There appears to be more arguments against this project than for it. And let’s not forget the Nicaraguan Canal which has caused some considerable international consternation and national protest”.
Meanwhile, in the crude tanker market this week, in the Middle East, “apart from the occasional ‘outlier’ fixtures, VLCC rates remained in the low ws 60s East, and mid ws 30s to the West on steady, if unspectacular, volumes, and reasonably easy tonnage availability. The market now moves into its June endgame phase, and a period that often provokes more dynamism. It remains to be seen whether that will be the case this time, and if so, whether it will then work to Owners’ favour. Suezmaxes initially flatlined, but a flurry of more restricted cargoes surfaced to the West, and for those runs rates spiked up to ws 50 and that bolstered demands to the East slightly too at up to ws 90 with those gains now expected to be maintained over the coming period. Aframaxes enjoyed another solid week, and have pushed their rate-envelop a little higher to 80,000 by ws 140 to Singapore where they should dig in over the near term”, said Gibson.
Similarly, in the North Sea, “some of the early fizz went out of the Aframax scene here as Charterers took their foot of the accelerator late-week, and rates eased back to 80,000 by ws 132.5 X-UKCont, and to 100,000 by ws 97.5 from the Baltic, in response. Suezmaxes saw little real volume, but there was always latent interest to the East with $4.675 million being seen for a Tees/Ningbo run. VLCCs tried to find cover, but a short-lived fixture at $6.1 million for fuel oil to Singapore eventually proved uneconomic to ‘arb’ traders, and Owners looked more towards the Caribbean for cast-iron business”, Gibson concluded.
