9th January 2015
INTO THE UNKNOWN?
There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things
that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.
Donald Rumsfeld
Following our last weekly report providing a brief synopsis of events affecting the tanker market
in 2014, it is perhaps worth taking a look at some events which could shape 2015. Right away
we would have to start off with the new maximum sulphur limits introduced into the ECAs from
January 1st. It is far too early to see the impact for owners/charterers in terms of operational
problems; however the decline in bunker prices has at least softened the blow in the short term.
We also expect to see the Ballast Water Management Convention ratified (and implemented
12 months later)at some stage during the year. This convention requires just one moderate sized
flag state to sign off the code which will compel owners to invest in expensive treatment
systems. Several flag states are known to be keen to sign up to the convention, but are
reluctant to be the one to tip the balance. 2015 should also see the final few single-hull tankers
taken out of trade once and for all. While very few are still trading in the conventional sense,
mostly in the MR sector and below, this could have an influence on scrapping levels.
Of course overall crude tanker
supply
growth
slowed
considerably during 2014 on
the back of low ordering
between 2011 and the 1st half
of 2013 with the exception of
Suezmax
tonnage.
As
a
consequence
the
crude
tanker delivery profile for this
year is just 50 units (10.6M/dwt).
Conversely orders placed for
product tankers over the same
period will explode rapidly into
the clean market during 2015
with just shy of 200 orders
(12M/dwt)
scheduled
for
delivery. As with 2013, last year
many sectors of the tanker market finished with a flourish. The difference between this year and
last is so far that we haven’t seen a proliferation of ordering buoyed by the improvement in the
freight market. Investment, for the time being, appears to have largely dried up which for most,
must be viewed as good news. OPEC’s decision not to cut production may have had some
influence in this area and speculation about how this decision will play out ahead of the next
scheduled meeting in June remains rife. The low oil price can be viewed as a double-edged
sword, stimulating oil demand but creating downwards pressure in terms of oil production. The
oil contango has steeped significantly over the last few days and many protagonists are
currently assessing their position ready to take advantage of the situation. Also, any changes to
US/Canadian policy on crude exports will also stimulate the market and recent changes in
condensate exports legislation may be the first step to achieving this.
Finally we make no apologies for using again a famous Donald Rumsfeld quote to open our
report which we believe to be apt to describe events as we enter into 2015.
CRUDE
Middle East_________________________
VLCC Charterers had Owners on the run up to, and
through, the Christmas period, but then shopped in
concentrated enough numbers to allow for a
market U-turn, and a steady upward ramp into the
New Year, with further upward pressure threatening
as we enter the final phase of the January
programme. Further, the crude price Contango has
entered 'green light' territory to make storage
economically viable for traders, and already a
basketful of period deals have been concluded.
Currently, rates stand at around ws 70 to the East
with high 30’s paid to the West. Suezmaxes had a
calmer time of it and broadly retained an
unchanging front over the period.130,000 to the East
moves at ws 92.5 -ish with West runs operating in the
mid ws 40’s. Aframaxes dipped initially, but regained
to 80,000 by ws 105 to Singapore, and should inflate
further over the coming week.
West Africa_________________________
Suezmaxes had a holiday boost to as high as
130,000 by an average ws 120+ but are now holding
a more defensive position at ws 90/92.5 to US Gulf,
and only a little better to Europe. There is resistance
to further falls, but Owners do need more enquiry to
make sure. VLCCs tracked Middle East fortunes
down, and then up again, and were further fortified
by the rash of fixing within the general Atlantic zone.
Rates now stand in the high ws 60’s to the East, and
close to US$5 million from Angola to West Coast
India.
Mediterranean_____________________
Aframaxes had a fairly grim time of it, hovering
around the ws 90 mark X - Med, but we are now
moving through a busier phase, and Owners will be
at least trying to add a bit of fat into next week.
Suezmaxes found plenty of festive spirit, and rates up
to 140,000 by ws 120 from the Black Sea to European
destinations, but the Russian holidays took a little
shine off, and the market eased to around ws 105 in
consequence.
A busier week to come perhaps and the possibility
then of some regained territory. Eastern runs
occasionally made sense too with US$5.25 million
the consensus for Black Sea to South China.
Caribbean_________________________
Aframaxes started sluggish, but jumped sharply into
the New Year with as high as 70,000 by ws 160
recorded for an upcoast run as things busied. Now,
it’s quieter, and less finely balanced, and rates are
back into the ws 130’s with further deterioration on
the cards. VLCCs fell off somewhat to $6.8 million to
Singapore, but regained composure as the whole
Atlantic region ignited, and Contango opportunities
also appeared. Rates have now moved again
above $7 million with $6.00 becoming the bottom
line to West Coast India.
North Sea___________________________
Nasty weather here, and therefore delays, and
support for rates. Aframaxes firmed to 80,000 by ws
125+ X-UK Cont with 100,000 by ws 150 payable ex
Baltic with ice class tonnage in high demand.
Suezmaxes saw little to shout about but a deal done
at 135,000 by ws 75 Baltic/trans-Atlantic would be
fairly reflective of the average buy/sell situation
prevailing. VLCCs became much more popular on a
widened 'arb' to the East - fuel oil runs to Singapore
pushed towards $5.6 million, whilst $7 million was
seen for Forties barrels to South Korea. Tonnage
remains tight, and rates will continue to hold - or
even build further.
CLEAN PRODUCTS
East______________________________
LRs in the Middle East have this week been a tale of
contrasts. LR2s picked up the baton with more
fixtures done than have been seen in a very long
time. But it was needed and rates have barely
moved due to the length of the tonnage list we
started with. 75,000 mt naphtha AG/Japan remains
around ws 90 and 90,000 mt Jet AG/UKC at $2.50
million. LR1s have been quiet and rates are starting
to drop off. 55,000 mt naphtha AG/Japan is now at
ws 120 and 65,000 mt jet AG/UKC is at $2.15 million.
MRs have been active this week, with a decent level
of enquiry and although the list remains tight, the fizz
we have seen over the last few weeks has
dissipated. TC12 runs are available 35 x ws 125, East
Africa has been done a few times 35 x ws 172.5, but
if pushed ws 170 maybe there from certain Owners.
The Jet runs to UK Continent remain around $1.60 1.65 million mark. Shorthauls continue to be the
bread winner for Owners, even though they are not
as heated as they were. Kuwait/UAE is fixing at
$350,000, but these runs are coming under slightly
more pressure. Red Sea runs are fixing at $800,000
basis Gizan.
Overall, it has been a painful week for MR Owners
with tonnage in North Asia. Cargo volume has
continued to lag and we have seen a couple of
fixtures that highlight Owners’ weaker sentiment –
such as $355kt for North China/Singapore. MR
Korea/Singapore was fixed at $435kt early this week,
and now even bullish Owners will concede that
market levels are around $430kt. In contrast, LR1s
have been a lot more active, with some
replacement requirements off the prompt window,
along with a decent amount of cargoes emerging
off 20 - 25 January dates, the market has nudged its
was up to $575-600kt levels Korea/Singapore (date
dependent). LR2s have also been fractionally busier
and should fix at around $625kt for Korea/Singapore.
The difference between the MRs and LRs in North
Asia is notable now, and you would expect them to
start to gravitate towards each other next week.
Given the weakness of the MR market we could well
see the LRs come off a little. The Singapore MR
market has had a less eventful but stable week,
where enquiry has been sufficient to hold the market
at its current fixing levels at a fraction below 30kt x ws
180 for Singapore/Australia.
DIRTY PRODUCTS
Handy____________________________
MR______________________________
Where do we go from here, the beginning of the
year couldn't have started in a more different
manner when comparing the handysize Continent
and Mediterranean markets. The Continent has
struggled to get to its feet so far in 2015 with little
30kt stem inquiry combined with softening rates
since the previous weeks. Although this said, it is still
early to say whether this market is sliding or just
hasn't fully woken up yet. Next week with most
nations back to work, in particular Russia, this should
paint a more honest picture.
Medium Range tonnage hasn't really been tested
yet from most Charterers point of view as far as the
Continent is concerned, as here also activity mainly
fails to present. This said, in the North where tonnage
remains tight, Owners will be resilient with their rate
ideas as more 45kt stems come to fruition next week.
In the Med, some of the healthy inquiry out of the
Black Sea has fed some of the MR's but majority of
Owners have been forced to accept smaller 30kt
stems. Next week we may well see those left able to
capitalise with well positioned vessels.
The Mediterranean has started with a much busier
vibe, especially out of the Black Sea. We expect this
momentum to carry through to the end of the
month which should see the market firm. It is now
apparent that the Black Sea is running solo and can
no longer be taken into account when freighting
other Mediterranean regions as there has been too
much inquiry. We have witnessed tonnage ballast
from West Med regions to capitalise on this rising
market creating a spread in fixing levels.
Panamax_________________________
The activity for this week peaked mid-way through
with the Continent firmly taking the leading role
where a number of stems came to market. With a
wide range of fixing levels being achieved in this
region which reflects in part through ships open
positions, distorting bench mark levels. The Med on
the other hand seems to remain flat with ws 130
being fixed a couple of times as natural tonnage
beings to see itineraries firm.
Dirty Tanker Spot Market Developments - Spot Worldscale
wk on wk
Jan
Last
Last
FFA
change
Week
61
Month
73
Q1 15
54
AG-Japan
TD3 VLCC
TD20 Suezmax WAF-UKC
+8
8th
69
-14
94
108
75
76
TD7 Aframax N.Sea-UKC
-1
121
123
105
92
Dirty Tanker Spot Market Developments - $/day tce (a)
wk on wk
Jan
Last
Last
FFA
change
Week
65,000
Month
84,000
Q1 15
57,000
AG-Japan
TD3 VLCC
TD20 Suezmax WAF-UKC
+18,250
8th
83,250
-9,500
54,000
63,500
36,000
50,000
TD7 Aframax N.Sea-UKC
-500
46,500
47,000
30,750
23,000
Clean Tanker Spot Market Developments - Spot Worldscale
AG-Japan
TC1 LR2
TC2 MR - w est UKC-USAC
AG-Japan
TC5 LR1
TC7 MR - east Singapore-EC Aus
wk on wk
Jan
Last
Last
FFA
change
Week
95
Month
100
Q1 15
-3
8th
93
-37
148
185
205
105
+0
120
120
111
100
-2
178
180
179
Clean Tanker Spot Market Developments - $/day tce (a)
AG-Japan
TC1 LR2
TC2 MR - w est UKC-USAC
AG-Japan
TC5 LR1
TC7 MR - east Singapore-EC Aus
wk on wk
Jan
Last
Last
FFA
change
Week
26,250
Month
26,750
Q1 15
+500
8th
26,750
-5,250
23,250
28,500
34,500
13,000
+1,500
27,000
25,500
21,250
20,000
+750
22,500
21,750
20,500
(a) based on round voyage economics at 'market' speed
LQM Bunker Price (Rotterdam HSFO 380)
-25
248
272.5
332.5
LQM Bunker Price (Fujairah 380 HSFO)
-38
280
317.5
377.5
LQM Bunker Price (Singapore 380 HSFO)
-39
281
319
375
All Spot rates quoted in worldscale flat rates at the time.
PAT/JH/JW/DP/SLK
Produced by Gibson Consultancy and Research
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