Drewry: Tanker Activity Down but Rates and Earnings Rise

Tanker owners enjoyed a strong rise in earnings last month despite a downturn in activity. The Drewry Tanker Earnings Index, published monthly in the Tanker Insight report, recovered in the last month of 2012 to finish above the two-year average. However, vessel earnings are still far from comfortable for owners. Spot chartering activity remained weak during a month shortened by holidays, although the pre-holiday rush for tonnage pushed freight rates slightly higher.

Demand for Suezmax tankers plunged by 26% in December, with Arabian Gulf loading declining by 37% and 45% for VLCC and Aframax vessel segments respectively over the same period. Activity in the Panamax market remained lacklustre with a 27% decline in fixtures, blamed on weak demand from western markets in the shorter trading month.

Yet the decline in activity was met with increases in rates and earnings across the different vessel segments.

VLCC owners got some respite as a pre-holiday rush in chartering resulted in improved earnings, despite a moderate rise in bunker prices. Firm Asian demand and a rush to fix cargoes before the holidays helped to push rates higher on the benchmark AG-Far East route by seven points to WS48. Earnings on this route nearly quadrupled to $15,500pd from $4,000pd in November.

Suezmax rates on the West Africa-US Gulf route increased by 16% to WS65 as demand improved with the suspension of force majeure on exports of Nigerian crude. Despite weak activity in the Mediterranean, earnings for Suezmax vessels doing intra-Med voyages were $5,200pd in December compared with $4,300pd in the previous month.

The introduction of ice-class requirements in the Baltic for Aframax carriers pushed rates on the Baltic-UK/Cont route higher by 26% to WS77. Earnings on this route increased to $7,500pd from negative $4,400pd. Similarly, Aframax earnings on intra-Northwest Europe routes tripled to $11,800pd from only $3,400pd in November. However, rates remained soft in the Caribbean, under pressure from both sides of the supply-demand equation. Earnings on the Caribs-US Gulf route declined to negative $4,800pd in December from positive $2,900pd in the previous month.

Panamax rates from Northwest Europe to the Caribbean and US improved on tight availability of tonnage. Earnings on this route climbed 8% to $18,700pd over the month. Similarly, voyages on the Caribs-US Gulf route fetched $15,200pd in December against $7,500pd during the previous month.