Mideast VLCC rates remain weak as Opec cuts start taking effect

The war is over. Or anyway the war of words over the price of iron ore is over. Last year discussions between Baosteel, representing the Chinese steel industry, and CVRD, the Brazilian mining giant, were extremely acrimonious.

In the end ThyssenKrupp jumped in and agreed a 19.5 per cent increase, which rather took the wind out of the Chinese sails.

Other steel producers in South Korea, Japan and Taiwan fell into line, forcing the Chinese to accept what it thought was an outrageously high increase.

Of course in 2004 the increase had been more than 70 per cent, which outraged China even more.

Now it has taken the lead and agreed a 9.5 per cent increase and it is thought that agreements between consumers and other mining companies will quickly follow.

The news led to some long-term chartering taking place. In the Capesize arena for example, the 2001-built Kyla Venture of 170,296 dwt was fixed by Cosco for five years' timecharter at $40,000 per day.

In the Panamax sector, the 1998-built Lopiz of 71,000 dwt was fixed for three years' timecharter at $23,000 per day, while the Handymax bulk carrier, the 2002-built Ocean Emperor of 53,054 dwt was fixed for the same period at the same rate.

In the container ship market, things are looking up after a few months of depression.

In the last week, there has been a fairly healthy amount of fixing. Vessels that are geared are more popular to the extent that brokers report that there is no longer any large geared tonnage open before the second quarter of 2007.

Larger ships also remain popular and there is a good deal of off-market business being concluded for ships with a carrying capacity in excess of 3,000 TEU.

Holidays

Ice-class tonnage is continuing to attract attention with the reported fixture last week of the geared newbuilding Langeness of 1,368 TEU for three years at $13,150 per day.

In the tanker sector, VLCCs in the Middle East remain weak as Opec cuts begin to be felt.

But smaller vessels attracted much attention. Bad weather in the Turkish Straits and the death of a pilot in the Bosphorus increased delays in the waterway.

These now amount to nine days in each direction, removing much tonnage from the availability list. The strength of the Suezmax market in West Africa boosted VLCC rates.

They remain above Worldscale 90 for US Gulf discharge, and Suezmax rates have held at about WS145.

Aframax strength was centred in the Mediterranean where rates held up above WS300. Suezmax rates were also dragged up and 130,000 tonne parcels remained in the WS180 region.

These high rates tempted owners to bring their tonnage through the Suez Canal from the Middle East where rates were lacklustre.

Of course the law of supply and demand began to be felt in the Arabian Gulf and rates firmed here.

The long series of holidays will quieten things down for a couple of weeks, but the various markets go into the holiday season on a high note and will probably emerge from this period without losing much momentum.

- The writre is a ship broker and marine consultant with more than 40 years of exprience in the tanker and dry cargo markets.