VLCC rates start to strengthen as charterers look to the long term

There are mixed messages being transmitted around the tanker market. The threat of further cuts in crude production by Opec is being brought closer as oil prices fall on world markets.

Unseasonal weather conditions still have a lot to do with sentiment and while stock levels remain above average, oil buyers are likely to play a waiting game.

Then as oil prices ease down due to the shortage of activity, oil buyers tend to return to the marketplace. But by then freight rates have taken a small dive.

But there is hope on the horizon. VLCC rates are starting to strengthen as charterers take a longer view.

For instance the 30th December cargo that Chevron fixed on a Tankers International vessel to the US Gulf at Worldscale 60 will not arrive in Louisiana much before February.

High pressure

There is therefore some anticipation that stock levels will be falling by then. This suspicion is reinforced by the fact that rates for shorter-haul cargoes from West Africa are still weak.

The time to restock from these closer facilities has not yet arrived.

Weather conditions in the Far East are unsettled although high pressure now sits over Beijing giving 6?C or 7?C night-time temperatures under clear skies.

But further south the hurricane Durian which hit the Philippines last weekend was most unseasonal.

The typhoon season in the South China Sea is usually between June and September. December is not normal and was an unpleasant surprise.

On the clean tanker sector of the market, fluctuating weather conditions in the US have sharply reduced stocks of clean products, bringing about an increase in imports from the Caribbean and from Europe, thus increasing rate levels to attractive levels.

Neither of these opposing pressures is encouraging owners to jump into the purchase market for the time being or anyway, until a trend is firmly established.

Where scores of dry cargo vessels are changing hands every week, this is not the case in the tanker sector.

The small shuttle tanker, the 1988-built, 39,977dwt Campos Transporter, employed by Petrobras in the offshore industry in Brazil, has been sold to FAL bunker services for a reported $17.5 million.

It was purchased by Ugland 18 months ago for $14 million, so there is nothing wrong with taking a profit as the saying goes. But otherwise tanker sales are becoming rare.

On the container front, the AP Moeller Group said it expects its container shipping division to post a net loss of some $600 million this year as a result of lower freight rates, higher fuel costs and the integration costs relating to its acquisition of P&O Nedlloyd.

So it has started selling off the vessels that do not integrate into the merged company so well. It has sold the ex-Nedlloyd Brisbane, Nedlloyd Adelaide, Nedlloyd Colombo, Nedlloyd Clement and Nedlloyd Clarence.

This reduces its fleet capacity by some 14,000 TEU. It has sold the vessels in an en bloc deal to the Chinese company Centrans Ocean Shipping for $43 million.

In the bulk carrier sector of the dry market, conditions are still riding high.

The extended period of high freight rates and good forecasts for future growth have encouraged both buyers and sellers.

Five Capesize bulkers have been sold by Lykiardopulo.

The vessels involved are the 1994-built Nymphe, 1995-built Kate, 1995-built Ianthe, 1996-built Savina and 1997-built Penelope.

The price paid by Chang Myung, with existing timecharters attached, is reported to be $250 million en bloc.

Brokers report that Dryships has sold one of its last older Capesize bulkers, the 166,058 dwt Shibumi, built in Spain in 1984.

The vessel has gone to Chinese buyers for a reported $24 million. Dryships has made a healthy profit on the vessel which it bought from Oak Maritime in June 2000 for $13 million.

In addition, the market has reached very high peaks since that time.

The other side of the age spectrum is the sale of the newbuildings, Shanghai WS yard numbers 1049 and 1051.

These 177,000dwt bulkers were contracted by Bocimar in 2004 for $58 million each.

The first vessel has been named Mineral Temse and both ships attracted a price of $92.5 million each, giving delivery to undisclosed buyers in April and October 2007 respectively.

This clearly demonstrates how high the market has risen.

So although the tanker market is lacklustre, the dry bulk sector is still flying.

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