Strong OPEC Discipline Continues Rate Depression

As a consequence of low crude oil volumes out of the Middle East - caused by OPEC restrictions and Iraq's stoppage of exports after rejecting to extend the "Oil for Food" program - tanker rates have been at very low levels, with older VLCCs being obtained at only $2,000-$4,000 a day and modern vessels being fixed at $12-$14,000 a day, according to the November monthly report issued by R.S. Platou Shipbrokers a.s. In addition to the low volumes, there has also been a shift toward eastern destinations, resulting in a sharp drop in transport distances. The recent build-up of oil stocks in tankers has not compensated for the negative trend in VLCC transportation demand, the report said. Because of this situation, tanker owners must wait for OPEC to ease production restrictions. Newbuilding According to Platou, the most competitive shipbuilders continue to receive orders for container carriers and bulk carriers. Substantial projects for tankers are under discussion. The number of berths for ships of more than 50,000 dwt for deliver at the end of 2001 are few, and some builders are close to filling the first half of 2002 as well. However, the report said, newbuilding activity is expected to ease in the next few months. The strong yen and the gradually-growing-stronger won point to a slight increase in newbuilding prices. The Tanker Market VLCC owners suffered from a weak market in November due to low ME export volumes and high bunker prices, Platou said. However, rates for modern tonnage improved by approximately five Worldscale points for eastern destinations when availability for such tonnage became scarce for early December. Suezmax rates showed few signs of improvement, the report said, and rates from West Africa continued to hover around 70-72.5 Worldscale for USG discharge. Aframax rates in the North Sea were influenced by the arrest of the Alandia vessels, and enjoyed a period of increasing rates before settling at around 90-92.5 Worldscale. As for clean tankers, the LR AG/East market remained weak, leaving owners hoping for and increase in demand. The MR market remained depressed, with only the Caribs to USAC trade showing any sign of improvement. With the extremely weak chartering market, the report said, scrapping is on the increase, with nine VLCCs being sold for demolition in November, bringing the total to 30 vessels so far this year. Values for modern vessels have been maintained for the most part. Firm levels have been paid for both modern and resale Suezmax tankers. The Dry Bulk Market According to Platou's report, freight rates for Panamax and Capesize vessels continued to increase during November, although more moderately than in October. Strong demand for iron ore, coal and grain were the main factors. Rates for Handysize tonnage remained steady for the first part of November, but softened slightly at the end of the month. Despite a healthy volume of sales of bulk carriers, buyers were focused on older tonnage than in the past few months. However, the values are appreciating, and there is no evidence of reduced confidence in the market, Platou said. - (R.S. Platou Shipbrokers a.s.)