Asia Tankers-VLCC Rates Fall on Reduced Demand

Posted by Joseph Keefe April 8, 2016

MidEast VLCC rates fall nearly 30 Worldscale points this week; port congestion in Basra, China adding to market uncertainty.

Freight rates for very large crude carriers (VLCCs) may drift lower next week on weaker sentiment among owners and reduced chartering demand ahead of the release of May's Middle East loading programme, brokers said on Friday.

Rates plunged this week from a two-week high hit on April 1 on slower chartering activity that is expected to extend into next week.

A rate of 59 on the Worldscale measure was already being offered for a Middle East cargo to Asia on Friday, a Singapore supertanker broker said on Friday.

The was more than three Worldscale points lower than the Baltic route index on Thursday.

Owners' attitudes were shaped by a raft of tankers seeking urgent employment after delivery from shipyards and vessel operators subchartering vessels at cheaper freight rates, brokers said.

"The market is all sentiment driven. The main issues driving it down are newbuildings and charter relets," said a European supertanker broker on Friday.

"Sentiment changed drastically this week. The market was up 30 Worldscale points last week and down 30 points this week," the broker said.

"Chartering activity is very slow today. I think it will be a bit like this all next week. No one needs to rush to fix which is making the market a little depressed," the broker said.

Charterers this week started to fix Middle East cargoes for loading in the last 10 days in April.

"There should still be a bit of cargo left for next week. May's Middle East cargoes won't come out until the very end of next week or early the following week," the broker said.

Port congestion in Basra and China was adding to the uncertainty about the market and how many tankers were available for charter.

There are about 25 VLCCs available for charter next week but that could increase, adding to the negative sentiment, if they come free from congested Chinese ports, brokers said

"There is a bit more cargo around, but the market is going to be pretty tough next week," the Singapore broker said.

VLCC rates from the Middle East to Japan fell to about W62.50 on Thursday, down from W87.50 a week earlier. That is equivalent to a drop in daily earnings from $74,693 to $49,138, chartering data on the Reuters Eikon terminal showed.

"Earnings have fallen but it's not a disaster for owners," the European broker said.

Supertanker rates from West Africa to China dropped to W64 on Thursday, against about W82.50 last Thursday.

Rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia were about W115.50 on Thursday, down from W125.25 on the same day last week as weak cargo demand outpaced vessel supply, brokers said.

Clean tanker rates from Singapore to Japan were unchanged at around W148.50.