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3rd July 2015 Mid-Year Review
Where do you begin to describe the events influencing the
resurgent tanker market of the past 12 months? In the crude sector,
OPEC’s historic decision against cutting crude production to defend
its market share reverberated throughout the tanker markets. With
the oil price crashing, bunkers, which represent the single biggest
voyage expense, followed suit. At the same time higher global crude
production increased transportation requirements which supported
freight rates. Towards the end of 2014, a widening contango in
crude oil futures increased speculation of floating storage.
Although the contango was insufficient to make floating storage
profitable, earlier this year up to 30 VLCCs were chartered in
anticipation of a floating storage play later in the year.
Increasing crude flows out of Iraq supported Suezmax earnings,
whilst exports from West Africa to Europe remained robust,
offsetting the near disappearance of the traditional West Africa to
US crude trade. With lower import demand from the US, flows of West
African and Latin America crude to the East increased, boosting
tonne mile demand. In addition, the continuing conflict in Libya
provided further support to the West African Suezmax market, albeit
at the expense of the Mediterranean Aframax trades. In the products
sector, earnings remained under pressure over the first half of
2014. However, the addition of refining capacity in the Middle East
began to support the market in the second half of the year. This,
coupled with stronger global refining margins, particularly in
Europe, has boosted product trade, and subsequent product tanker
earnings. With margins remaining strong so far in 2015, together
with an additional 800,000 b/d refining capacity in the Middle East
coming on stream, product tanker earnings have remained at their
highest levels since 2008. A comparison spot rates/tce earnings on
several of the benchmark trades can be seen on the next page. By
the end of June VLCC earnings on TD3 (AG-Japan) were at $69,250/day
compared with just $12,250/day for the corresponding period last
year. Making the same comparison for TC2 (MR 37Kt gasoline trade
UKCont-USAC, rates have moved from $5,500/day last year to a very
healthy $26,500/day. The continued recovery in earnings has been
both supply and demand driven. With the exception of MRs, fleet
supply growth in both the crude and product sectors has slowed
since 2014 with supply in some size groups even contracting.
Limited fleet growth is also apparent this year which has also
contributed to the markets strength. Inevitably, with the success
of the tanker sector, the temptation to take advantage of low
newbuilding prices has resulted in a sustained period of investment
across the board with the exception of the MRs. With shipyards
reporting shrinking orderbooks beyond 2016, pressure is mounting on
yards to lower prices still further particularly with the dearth of
orders from the other shipping sectors currently feeling the pinch.
At the other end of the supply chain, not surprisingly we have seen
very little recycling so far in 2015 with just a mere 17 tankers
(25,000 dwt+) sold – the largest two units, both 1992 built were
Aframaxes. Lightweight prices themselves have softened considerably
since last June and currently stand at around $390/ldt (basis
India) about 20% lower than this time last year – not that many
tanker owners would be currently considering this option.
Second-hand values across all tanker sizes are all higher than in
June 2014, even for the 15 year olds. And there have been several
notable second-hand deals, which have attracted the attention of
the market. Values for the crude tankers have risen faster than
those of the products sector, but nevertheless there are plenty of
buyers looking to invest in both sectors. Probably the most talked
about deal so far this year was Euronav’s acquisition of four VLCCs
for $96 million apiece under construction for Metrostar, which has
given the buyer newbuilds without adding to the orderbook.
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Looking at events on the political scene little has changed
since last year’s round up. A resolution to the Iranian crisis
appears to be near but again nothing has been settled and a further
extension of talks is apparent. The Libyan situation remains
unstable and no immediate peace process appears to be on the
horizon. Sanctions against the Russian Federation in respect to the
situation in the Ukraine remain in place but have had little impact
as crude and product exports continue to flow. The US Government
has so far withheld taking any decision on overturning the ruling
on the ban of crude exports, but we continue to see even larger
volumes of products from the region. Certainly, the next few months
will be interesting, to say the least. For the tanker market, we
could be entering a period of “ifs and buts” as well as entering
uncharted waters which will be challenging. The table below shows
some of the market developments affecting the tanker industry over
the past 12 months. June 2013 June 2014 June 2015 Spot Rates/tce
Earnings (a) WS TCE/day WS TCE/day WS TCE/day VLCC Rates: Mid
East-Japan 41 $19,750 38 $12,250 64 $69,250 Suezmax Rates: West
Africa-UKC 49 $9,500 72 $22,750 93 $50,000 Aframax Rates: North
Sea-UKCont 83 $7,250 99 $13,500 150 $69,500 55k Naphtha: Mid
East-Japan 95 $10,000 110 $13,000 141 $32,250 37k Gasoline:
UKCont-USAC 118 $9,000 99 $5,500 171 $26,500
VLCC S/H D/H Total 13 623 636 1 625 626 1 637 638 Suezmax S/H
D/H Total 1 488 489 0 476 476 0 483 483 Aframax/LR2 S/H D/H Total
16 900 916 8 887 895 4 927 931 Panamax/LR1 S/H D/H Total 13 380 393
7 433 440 2 416 418 MR (25-55mdwt) S/H D/H Total 105 1,756 1,816 71
1,772 1,843 59 1,821 1,880
Deliveries Jul to Jun (25,000 dwt+) 26.2 M dwt (197 vsls) 17.7 M
dwt (162 vsls) 16.7 M dwt (180 vsls) Orderbook (excl. options) 49.6
M dwt (455 vsls) 62.1 M dwt (590 vsls) 77.3 M dwt (599 vsls) VLCCs
On Order 61 86 114
Demolition Jul to Jun (25,000 dwt+) 9.8 M dwt (96 vsls) 12.3 M
dwt (104 vsls) 4.7 M dwt (70 vsls) Ldt price China / Sub Continent
$315 / $430 $325/ $495 $220/ $390
VLCC Price NB / 10yr old $90M $29M $100.5M $50M $95M $52M
Suezmax Price NB / 10yr old $56M $26M $66M $34M $64M $40M Aframax
Price NB / 10yr old $47M $20M $54.5M $24M $53M $31M
Brent Oil Price (ICE Close) $102.82 (June27th) $ 112.36(June
30th) $ 62.00(June 30th) Brent-Previous 12 mth Low/High $97.34 /
$118.9 $101.63 / $117.34 $112.29 / $46 Bunkers 380cst
Fujairah/Rotterdam $605 /576 tonne $623/$599 tonne $333/323 tonne
World Oil Supply (May) OPEC Crude Production Non OPEC
Production
91.6 million b/d 31.1 million b/d 51.22 million b/d
92.6 million b/d 30.2 million b/d 53.42 million b/d
95.61 million b/d 31.27 million b/d 54.85 million b/d
(a) These are assessed at market speeds (around 13 knots laden /
11.5-12.0 knots ballast)
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CRUDE
Middle East_________________________ Pressure stayed upon VLCC
Owners but, overall, they managed a stout defence, and although
average rates settled, a collapse was prevented, and the market
ended the week in 'conference' territory in the low ws 60s East and
low/mid ws 30s to the West. There’s plenty yet to come for July,
but equally, availability also remains plentiful enough, and
Charterers may still just retain the advantage, unless they rush to
complete the programme in short order. Suezmaxes started steadily
enough, and then increased in confidence as local interest swelled,
and continued short term t/c enquiry circulated in the further
East. Rates moved to above ws 100 to the East with over ws 60
payable now to the West. Aframaxes eased slightly to 80,000 by ws
145 to Singapore, but there’s not a lot of excess tonnage, and it
will be either 'no change', or an orderly retreat, for next week.
West Africa_________________________ The Suezmax see-saw kept
rocking....quiet, with a tonnage build, initially brought the
market noticeably lower, and into the ws 80s, but that then
provoked a wave of bargain hunting that reversed the negative
conditions, forcing rates back up to 130,000 by ws 90/92.5 to the
USGulf,and close to ws 95 to Europe. There may be no further gain,
but if Charterers do decide to trade on forward dates, then a
higher price is likely to result. VLCCs found lots of Indian
opportunity which became further complicated by replacement needs,
and rates held up to $5.65 million to West Coast India and at up to
ws 65 for far Eastern options.
Mediterranean_____________________ No disasters for Suezmaxes,
but there was a general softening on a slower pace, and reasonable
availability. By the weeks end, although activity was still
sluggish, the turnaround in West Africa was beginning to reinforce
sentiment, and that should stem any further decline. Aframaxes slid
inexorably through the week to move from ws 150 to ws 115 X-Med in
just a few days. Owners sense, now, that a bottom has been reached,
and the hope will be that the same conclusion will be reached by
Charterers, and a busier spell then provoked.
Caribbean_________________________ An easier fixing pace, fatter
supply, and the U.S. holiday at the weeks end, combined to erode
Aframax hopes, and rates settled towards 70,000 by ws 145 up coast
with Owners vulnerable at the start of next week to. VLCCs saw
comparatively little which eventually brought rate ideas down to
just under $7 million to Singapore, and near $6 million to West
Coast India. Still very healthy, but necessarily reflective of
better availability hitting up against the drier demand. North
Sea___________________________ A complete about-face for previously
buoyant Aframaxes...the balloon burst at the 80,000 by ws 190+
height X-UKCont, and it was a flapping fall to ws 105 as the week
progressed, with 100,000 by ws 90 now available from the Baltic.
Larger fuel oil movements to the East were hard to bolt together
for traders, but an attempt was made at the $6.1 million level to
Singapore, which would seem repeatable.
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CLEAN PRODUCTS
East______________________________ MRs in the AG remain active
and cargoes still need to be covered. Tonnage is tight on the ppt
position and over the next 7 days or so as a consequnce rates are
expected to remain unchanged. There is continued optimism from
owners, as they expect MRs to benefit from the firm LRs, if the
larger stems are split up. 35,000 mt Naphtha AG/Japan is upto ws
150 and 40,000 mt jet AG/UKCont hoveres around $1.80 million. WC
India to Red sea is firm at $900,000. East LRs saw a stellar start
to the week particularly on the LR2s but rapidly onto the LR1s.
55,000 mt Nap AG/Japan is now upto ws 155 and 65,000 mt Jet
AG/UKCont is at $2.70 million. 75,000 mt Nap AG/Japan hit ws 140
and remains there with Owners pushing for more. 90,000 mt Jet
AG/UKCont also is stable at $3.40 million and again Owners are
impatient for more - but with returns as high as they are some
Owners may well just take the money and move on.
Mediterranean____________________ The X-Med market has carried
on up strongly at the end of the week, after a brief stall on
Wednesday, with rates now hitting 30 at ws 265. Tonnage is very
tight and Owners are pushing hard. The MR Med market is ticking
over for now but encouraged by the very busy Handies. 37,000 mt
Med/TA is now at ws 180 with West Africa untested but enquiry to be
covered, around 37 x ws 195. Med/East so far has stayed stable at
$1.2 million lumpsum and +150k into the AG. UK
Continent_____________________ A quieter end to the week on TC2
with 37,000 mt at ws 170 being paid, some 10-15 points down. With
the US on holiday today activity levels will remain slow for now
but with a few more cargoes anticipated rates could firm slightly
into next week. X-UKCont Handies remain flat 30,000 at ws 205.
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DIRTY PRODUCTS
Handy____________________________ The general tone of the
continent this week is that the region continues to thrive in this
market and owners had real belief in market strength. This comes as
little surprise when you take into consideration the number of
vessels being sent to the Mediterranean on long haul voyages. This
said, come Friday the mood has started to shift where a few days
have passed with limited enquiry. One thing charterers will take
from this week is that perhaps finally a trend reversal may be
coming their way. The Mediterranean has taken a U-turn this week
and we are starting to see the effects in rates slowing down.
Although we have not seen a dramatic change in numbers, conditions
do appear to have changed, and this market now appears somewhat
unsettled. Tonnage remains a little tight though and charterers
need to keep on their toes, if enquiry picks up again confidence
can just as easily be regained.
MR______________________________ On the Continent those owners
firm on itinerary monopolised market trend when it came to fixing
full 45kt stems that came to fruition. Tonnage has been limited in
this region and therefore come Friday we fail to report any real
shocks with the market remaining stable. This said, the
Mediterranean come week end has left some rather more twitch as
where the Handies have lost value, thoughts begin to rise as to
whether conditions on the next opportunity will be as profitable.
Panamax_________________________ At the start of this week the
continuing trend of firm markets was playing into owner's hands,
highlighted with reports of ws150+ being fixed from the Med. This
said, Charterers have started to spot that there could be some
light on the horizon where the Aframax sector in the US shows signs
of slowing. For now the market this side of the Atlantic is very
much date dependant and expect any owners left in natural position
to be snapped up quickly, albeit, at sensible levels.
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PAT/JH/DLT/DP/LHT Produced by Gibson Consultancy and
Research
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information
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This report has been produced for general information and is not
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believed to be reasonably accurate, it is by its nature subject to
limited audits and validations. No responsibility can be accepted
for any errors or any consequences arising therefrom. No part of
the report may be reproduced or circulated without our prior
written approval. © E.A. Gibson Shipbrokers Ltd 2015.
wk on wk July Last Last FFAchange 2nd Week Month Q3
TD3 VLCC AG-Japan -4 61 66 60 61TD20 Suezmax WAF-UKC -16 88 104
92 86TD7 Aframax N.Sea-UKC -71 119 190 133 111
wk on wk July Last Last FFAchange 2nd Week Month Q3
TD3 VLCC AG-Japan -6,750 66,250 73,000 63,000 65,500TD20 Suezmax
WAF-UKC -12,000 46,750 58,750 48,750 43,750TD7 Aframax N.Sea-UKC
-56,250 46,000 102,250 55,750 39,000
wk on wk July Last Last FFAchange 2nd Week Month Q3
TC1 LR2 AG-Japan +15 140 125 126TC2 MR - west UKC-USAC -25 168
193 154 158TC5 LR1 AG-Japan +10 149 139 144 138TC7 MR - east
Singapore-EC Aus +2 189 187 185
wk on wk July Last Last FFAchange 2nd Week Month Q3
TC1 LR2 AG-Japan +7,000 43,750 36,750 38,250TC2 MR - west
UKC-USAC -5,500 26,250 31,750 22,500 23,500TC5 LR1 AG-Japan +3,250
34,250 31,000 32,000 30,750TC7 MR - east Singapore-EC Aus +500
23,250 22,750 21,7500
LQM Bunker Price (Rotterdam HSFO 380) -3 323 326 332LQM Bunker
Price (Fujairah 380 HSFO) -15 323 338 354LQM Bunker Price
(Singapore 380 HSFO) -7 334 341 362LQM Bunker Price (Rotterdam 0.1%
LSFO) -21 533 554 563
(a) based on round voyage economics at 'market' speed
Dirty Tanker Spot Market Developments - Spot Worldscale
Dirty Tanker Spot Market Developments - $/day tce (a)
Clean Tanker Spot Market Developments - Spot Worldscale
Clean Tanker Spot Market Developments - $/day tce (a)