Despite the fact that ship owners appeared to be pushing for higher VLCC rates over the course of the past week, a rebound in freight rates wasn’t able to be materialized, as a result of abundant tonnage availability. In its latest weekly report, shipbroker Charles R. Weber said that “VLCC rates struggled through much of the week as an apparent and abrupt conclusion to the September program with fewer than expected cargoes rocked sentiment. Still, demand strengthened: In the Middle East market, where charterers progressed to early October cargoes, fixture activity jumped 41% w/w to a four‐week high. Meanwhile, the Atlantic Americas saw demand fixture activity extend from last week’s strong pace, rising 20% w/w to 12 fixtures and raising the specter of insufficient natural positions going forward that could prompt ballasters from Asia”.
According to the shipbroker, “as a result of this, by the close of the week rates turned positive, paring the earlier losses and concluding above last week’s closing values. Further rate gains appear likely as the extent of surplus capacity has narrowed. After surging during the final decade of the September program due to low cargo availability to 22 units, the surplus appears poised to drop to just 13 units during the first decade of the October program. This would be the smallest surplus observed in over a year and thus could support a strong push in rates – though we note this is heavily subject to the extent of demand, which itself is proving uncharacteristically volatile”, said CR Weber.
Meanwhile, “reports indicate that Iran’s crude supply is in fresh decline as many buyers seek alternative sources ahead of the November 4th sanctions re‐imposition date, under the JCPOA of May 8th. We expect that this will bode well for the VLCC market, as buyers will require replacement cargoes sourced from both other regional producers and from producers further afield, stoking both strong ton‐miles and greater spot market VLCC demand. As observed during previous sanctions on Iran’s petroleum sector, some units in Iran’s 38‐strong NITC VLCC fleet may idle to undertake storage activities, thus exiting from normal trades. Presently just four of NITC’s units are engaged in storage, with three of these for a period of under three weeks. Lending further support to the VLCC market, import plans ahead of China’s 400,000 b/d Hengli Refinery startup indicate a number of VLCC cargoes through the end of the year. Reports indicate that a startup date for the plant in October has been postponed to November, but that import plans calling for up to 2 MnMT crude this year remain unchanged. A former Itochu trader is understood to be joining in October to facilitate crude procurement and undertake derivative trades. The refinery is designed to process Arab Medium, Arab Heavy and Brazilian Marlin at a ratio of 6:3:1”, CR Weber concluded.
In the product tanker market, shipbroker Affinity Research said that “although some are hoping for clean markets to pick up once refineries, particularly those in Europe, install LSFO refining capacity extensions, for now the continent is continuing on a woeful trend of limited inquiry. This has pushed rates down further, with TC2 rates verging on 37 x WS 100 and an additional 10 points for West African runs. On a similar note, Handies are maintaining a flat 30 x WS 130 for Baltic – UKC. The US, though, is showing signs of promise with a strong start to the week establishing a 38 x WS 105 on TC14, although this may require some testing. LR1s and LR2s have also been on the more positive ends of things, with LR1s’ ARA – WAFR landing 60 x WS 100 and LR2s creeping up to USD 1.75 Mn for Med – Japan. The Med list has taken some time to tighten up, but upon doing so, rates reacted accordingly. PPT cargoes, specifically, helped rates firm up quicker, which has firmed up sentiment all around, even though the odd tonnage still lingers. We’ve seen 30 x WS 130 once or twice in the Med, and would summarise the market as 30 x WS 125 – 130, depending on load and date, which is better than where we were at least! The Black Sea, on the other side, hasn’t been properly tested in light of the firmness in the Med, but we assume we’ll be seeing levels of 135 – 140 at this rate. Market prospects going forward depend on further activity next week”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
