China's stockpiling could affect tanker rates

What is China up to? It seems to be buying more and more crude oil and more and more products. It is appreciated that some of this growth can be attributed to economic success, but it has also cut back on the export of products until at least January.

It appears then that China is creating a stockpile of both crude oil and products, mainly petrol and diesel fuel. It would stockpile jet fuel if it could, but growth in passenger transport has increased by a third over the past year. Beijing Capital International Airport has been designed to handle 35 million passengers per year. In 2005 41 million struggled through its doors and this year, even more have done so. A picture has emerged of other Chinese airports struggling to handle an above-designed number of passengers. So stockpiling jet fuel would seem impossible.

But China still has import demand, which is more than can be said for other Asian countries. The clean tanker market in the Eastern hemisphere is very uncertain.

The naphtha market from the Arabian Gulf is quite challenging as China is now using condensate in its naphtha-cracking units as a feedstock, driving down freights for larger clean ships in the Middle East.

The approaches to winter have been warm in both Asia and Europe and the cold snap hasn't snapped in North America yet. Therefore rates for smaller MRMax and handy-sized tankers is still declining.

But things do seem about to turn for VLCCs, anyway.

VLCC cargoes from the Arabian Gulf have turned the corner and having bottomed out at about Worldscale 67.5 for voyages to both the East and WS65 to the West. By the end of the week, rates had moved up to WS80 for double-hull and WS70 for single-hull vessels to the East. Rates did not harden so much to the West, only about three to five points, but the upwards momentum had started. Brokers report that voyages from West Africa are softer to the US and largely untested from West Africa to the East.

Suezmax

Suezmaxes on the other hand are quite weak. In their bread-and-butter market from West Africa vessels are being concluded at WS97.5 for North West Europe and WS105 for the US. Things have not been that bad for a long time. The Med is no better with rates from both the Black Sea and the eastern Med falling below WS100, down to WS90 in some cases. And without any demand growth from the US, things are unlikely to improve for owners.

Aframax

For Aframax, tonnage rates East of Suez have steadied at above WS150. A similar picture exists in the Far East where rates are being slightly disguised by owners agreeing lumpsum payments, but nevertheless, WS150 is about the current level.

In the Med, things have not improved since last week when WS120 was the going rate for cross-Med voyages and Med to North West Europe trips were being concluded at about WS115.

There is more enquiry from the Baltic for Russian crude oil, but the normal 100,000 tonne parcel is only attracting rates of about WS100 to WS105. Things should firm up next month when ice-class tonnage will be required.

In the Caribbean, the supply and demand equation appeared to be in balance and rates stayed steady.

The writer is a shipbroker and marine consultant with more than 40 years of experience in the tanker and dry cargo markets.