Market's lull softens freight rates

VLCC

The British Chancellor of the Exchequer is visiting Washington to meet with US Treasury officials.

His message is expected to include some strong encouragement to strengthen the dollar, which has been weakening over many months.

This is affecting world trade and especially the economies of countries relying on US dollar-priced exports, such as those in the Gulf.

Loading dates for VLCC fixtures have now moved well in January.

This has only amounted to a quarter of the usual monthly amount, so that the run-up to the holidays is expected to be somewhat hectic.

The announcement that the Saudis will reduce crude output to help underpin the price of oil will serve as an added spur.

In the meantime, this lull in the market has softened freight rates, especially for single-hull vessels whose positions seem to dominate the early to mid-January tonnage lists.

In West Africa, crude oil movements to the Far East have taken a more significant share of the market, at the expense of the West Africa/USA trade.

In the latter area, only one fixture was reported at Worldscale (WS) 160, whereas last week the level was set at about WS250. There are suggestions this single fixture subsequently failed.

This week, we expect to see more VLCC voyages to the Far East including India, as Suezmax rates, which look as if they have bottomed out, are expected to firm up and provide less fiscal competition.

Suezmax

Markets continued to ease this week, but reached a low point, especially for voyages from West Africa. There have also been a higher than usual number of fixtures failing before final confirmation has been given by the charterers.

This has led to suggestions that some trading houses are deliberately fixing vessels and then failing them to manipulate the established market rate and thus manipulate the freight futures market.

Notwithstanding these shenanigans, rates firmed again with WS200 being paid from West Africa to the United States, and WS220 being conceded for Black Sea and Mediterranean loadings, while WS225 was paid for a voyage from the North Sea to the US.

There was also more business seen from the Caribbean and Mexico with a voyage to the US Atlantic Coast attracting a rate of WS235.

In the Gulf, there was less Suezmax activity and rates eased a little to finish the week on about WS270 for a voyage to China.

Aframax

There was nothing special available for Aframax tonnage in the Gulf and Indonesia. Rates fell back a bit from both areas to finish the week in the low to mid WS300s.

After a bad week, rates firmed for Aframax tonnage in the Mediterranean, spurred on by firming rates in the Black Sea as January cargoes were starting to be covered.

Rates moved up into the WS300s for 80,000 ton cargoes with double-hull tonnage attracting levels in excess of WS350 for loading both in the Med and the Black Sea.

With plenty of cargoes, with continuing delays in the Bosphorus and a challenging mix of double hull and single hull tonnage, there is no apparent reason for rates to fall back.

In the North Sea and Baltic, rates firmed markedly to finish the week at WS275 with a 50-60 point premium for Ice-class tonnage.

The Caribbean market has seen high levels of activity and but little change in freight rates. Levels rose from WS350 to WS357 for the traditional 70,000 ton cargo.

Andrew Lansdale is a shipbroker and marine consultant in both the tanker and dry cargo markets. He has worked in London, Tokyo, Singapore, Hong Kong and Bangkok.