VLCC market poised to firm up

VLCC

We have again been counting the number of monthly fixtures concluded from the Arabian Gulf. At the height of the market in November 2004, rates peaked well above the Worldscale 420 level.

During that month, 108 fixtures were negotiated. For January 2005 the number is close to 110 already and the market has been assured that Opec cutbacks have been implemented.

So we have a similar number of deals and there are a similar number of vessels trading, but still the market has slipped down into double figures.

In November though, there were more fixtures from the Atlantic basin to the Far East.

These were covered by vessels which had been fixed from the Arabian Gulf to the West, had then ballasted the comparatively short distance to West Africa, the Mediterranean or North West Europe and had then loaded for the Far East; mainly China.

This year there have been fewer long-haul West to East cargoes and tankers have simply ballasted back to the Arabian Gulf from the West, swelling tonnage availability in the Gulf.

As a result of this longer tonnage list, charterers have been able to keep a lid on rates. Also the Opec cutbacks have resulted in smaller cargoes rather than whole shipments being removed.

Smaller and older single hull vessels have therefore been more popular and these, on the whole, have been cheaper.

For example, Chinese charterers have fixed three vessels, the Titan Leo, the Titan Neptune and the Titan Venus for voyages to the Far East at about WS70.

Curiously enough, these were fixed on the day that the European space probe landed on Titan, one of the moons of Saturn, after a seven-year journey; but we digress.

Half the number of fixtures last week were concluded on vessels similar to the Titan trio. We are even seeing ships fixed for mid-February before cargo nominations have been announced by suppliers. It is clear that charterers are expecting the market to firm up and are quickly taking advantage of what this week may well be perceived as a reasonable rate level.

From West Africa, rates are still easing, having fallen from about WS120 a week ago to about WS 100/105 last week. A typical deal is the Grand Lady, fixed for a voyage to the US Gulf to Marathon Oil at WS 100.

Suezmax

Whereas the VLCC market in the Arabian Gulf appears to have bottomed out, the Suezmax market is still easing. The cause is mainly the lack of enquiry. We have seen a couple of fixtures to India and one to the Far East, but the current level of WS125/130 is unlikely to be maintained this week.

Rates are higher in West Africa and voyages to the US and North West Europe are attracting vessels at about WS150. But these ships are now facing competition from VLCCs from charterers who are able to lift two cargoes in one vessel. Therefore, as the VLCC market eases, Suezmax rates will follow them down.

A similar easing of rates was seen in the Mediterranean and Black Sea loading areas, down to WS130 from last week's WS140. The tonnage supply may get tighter though.

The Dardanelles has been closed since January 11, shutting the Black Sea off from the Mediterranean. Thick fog persists in the area and the forecast is poor. The current seven day delay may well double.

Elsewhere, cargoes in the North Sea and Baltic are still being concluded at about WS150 for local and US destinations.

Aframax

The bad weather in the Bosphorus has also affected the Aframax market in the Mediterranean. Markets have risen from WS135 to WS165 and are still strengthening.

Such strengthening is likely to accelerate as replacement tonnage is sought to substitute for the delayed Black Sea vessels. Ships loading in the Black Sea are now attracting rates in excess of WS200 and this market is also firming.

In the Arabian Gulf, charterers appeared to play their cards close to their chests and the absence of apparent cargoes forced rates down to WS165. A similar picture appeared in the Far East market and Indonesia/Japan is currently being fixed at WS185.

Elsewhere, in North West Europe, despite more activity, rates are drifting lower for both local voyages and for trans-Atlantic, down to WS160 and WS 240 respectively.

In the Caribbean there has been less activity and rates have move sharply down from WS360 to WS 300 for the traditional 70,000 ton cargo size.

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