VLCC Rates to Stabilize Around Current Levels on owners’ resistance

Reuters
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March 31, 2017

vlcc supertanker

ReutersBy Keith Wallis

SINGAPORE, March 31 (Reuters) – Freight rates for very large crude carriers (VLCCs), which have fallen to six-month lows, are likely to hold steady around current levels as owners resist charterers’ attempts to push rates lower, brokers said.

“Rates are stabilising now – owners are resisting further falls. But I don’t see the market going up,” a European tanker supertanker broker said on Friday.

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“There’s been a consensus of sentiment rather than any real improvement in the market. There are still a lot of ships available for charter,” the broker said.

Charter rates from the Middle East to Asia are around $15,000-$20,000 per day, according to the route and specification of the ship, the broker said.

That is below VLCC breakeven costs of about $22,300 per day, according to Inger Klemp, chief financial officer of leading tanker owner Frontline.

“Owners are trying to show some resistance to charterers at these shoddy levels which seems to be having a marginal effect,” a Singapore-based VLCC broker said.

Rates from West Africa to China are around 55 on the Worldscale measure, while the Middle East to China is around W45, the Singapore broker said.

Some charterers are paying an extra Worldscale point or two to charter modern tonnage rather than older vessels at a slightly cheaper rate, the Singapore broker added.

Rates from West Africa to Asia have been supported by an increase in the number of cargoes from the United States and the North Sea, Norwegian ship broker Fearnley said in a note on Wednesday.

But Fearnley questioned if is this was sustainable and would impact rates from the Middle East to Asia.

Some refiners in Asia have been snapping up cargoes of light crudes from the U.S. and Russia, while crude shipments from the Americas hit an all-time high in March.

That comes as around 40 spot VLCC cargoes have been fixed from the Middle East for loading in the first 10 days of April, the European tanker broker said.

That is in line with previous months despite more than 20 facilities at refineries in Asia closed for maintenance, according to Reuters data.

VLCC rates on the Middle East-to-Japan route dropped to around W46.25 on Thursday from W48 a week earlier.

Daily earnings, which have remained largely flat all week, are down to $15,208, the lowest since Sept. 27, according to data on the Reuters Eikon terminal.

Rates on the West Africa-to-China route rose to W56 on Thursday from W54.50 a week earlier.

Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia continued to fall, dropping to around W106.75 on Thursday from about W121 the same day last week, as too much tonnage chased too little cargo, a Singapore broker said. (Reporting by Keith Wallis; Editing by Amrutha Gayathri)

(c) Copyright Thomson Reuters 2017.

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