Rates tumble further in Gulf markets

VLCC

It was not long ago that the VLCC timecharter equivalent income was well in excess of $230,000 a day (Dh845,000).

It seems it stayed at that high level for most of the year. A quick look at the graph of rates, however, reminded us that these record levels were only attained in November and then only for a short period of time. In September, they were at the same level as they are now about $60,000 (Dh220,000) a day.

We predicted last week that rates would level out, but again we misjudged the mood out there. The fall in rates has been somewhere in the order of 25 to 30 per cent over the Christmas period.

It would appear that since vessels are now being fixed for the end of January loading windows, ship-owners do not have much faith in the markets maintaining their current levels and are fixing quite far ahead.

Western Hemisphere loading areas have also been affected and rates from West Africa to the US Gulf have fallen 40 points from Worldscale 165 to WS 125. As we suggested last week, these falls appear to coincide with the Opec announcement of a reduction in crude oil exports, in order to maintain prices. Crude oil stocks in the United States continue to stay at a low level. If there is a fall in temperatures and the demand for heating oil increases, there will be a fight for what crude oil is available.

Suezmax

The average number of Suezmax fixtures over the past few weeks has been in the order of 50 from all loading areas. Last week, we saw only about 25. As a result, rates should have eased. They were maintained for West Africa to the United States at about the WS220 level and about WS200 for voyages from the Gulf to both China and Turkey. Rates increased for voyages from the Black Sea and the Mediterranean and ended the week at about WS230 240.

This market strength probably stems from a lack of VLCC size cargoes, forcing charterers to support Suezmax sizes. As a consequence, current timecharter equivalent income for these one-million barrel capacity vessels is similar to VLCCs at about $60,000 a day (Dh220,000).

Aframax

A distinct lack of enquiry has seen rates in theArabian Gulf fall from WS285 to WS220. Of course, there was a sort of habit that charterers and owners got into, where rates varied in a band of between WS180 and WS220 for voyages from the Gulf and from Indonesia. It has only been in recent weeks that the magical WS400 was breached. We are now back to the old levels and it will be interesting to see if this band is maintained.

A lack of activity in the market place has seen rate levels fall from WS320 to WS240 for cross-Med voyages and fixtures from the Black Sea have fared no better.

This lack of enquiry was also experienced by owners with tonnage in North West Europe with inter-UK Continent rates falling to about the WS230 level. Ice-class Aframax tonnage did better, especially from the Baltic and from North Russia with 100,000 cargo sizes managing to keep rate levels higher than the WS 400 level.

In the Caribbean and East Coast Mexico, things were very much the same as last week, with Caribs/USA voyages for the usual 70,000 ton cargo being maintained at between WS350 and WS360.

Dry cargo

Now that we have crossed into 2005, it would be remiss of us to ignore what has happened in dry cargo over the last year. In January 2004, rate levels for Capesize and Panamax bulk carriers were at an all-time high. The gloom-and-doom merchants recommended that we enjoy it while it lasted. In the spring, when Capesize rates fell from a high of $100,000 (Dh367,000) a day to $50,000 (Dh183,000) a day, it looked as though they were right.

In the summer, the Chinese decided to increase steel production. This resulted in an increase in iron ore imports from 13 million tons per month to 18 million.

Of course, with these imports, the amount of both steam coal and metallurgical coal imports increased and rates for both Capesize and Panamax bulkers responded accordingly. We are now seeing rates as high as $118,000 (Dh433,000) daily for Capes and $55,000 (Dh183,000) daily for Panamaxes.

Handymax and Handysize bulker rates were similarly pulled up in the spring and summer, but freights are now under downward pressure as the amount of activity slowed over the holiday season.

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