High bunker prices starting to push tanker rates to higher ground

In its latest weekly report on the tanker market, Braemar Seascope said that VLCC owners in the Arabian Gulf are starting to take notice of the rising bunker price and managing to push rates marginally upwards. Many owners at this stage have decided not to work available cargoes because the rates were simply too low. "Stubborn charterers have been able to use older, less well approved units rather than pay the required premium for more modern vessels. As the week progressed, cargoes have attracted numerous offers but most in the hope that the weaker vessels will desist in jumping on an early counter. There have been signs that some charterers have decided to fix forward cargo positions covering any possible upside to the market at the end of the 2nd decade of September. There is a general feeling that there could be some upward movement in the market, not because of any demand issue but simply owners unwilling to accept prevailing rates" said the report.
It continued by mentioning that West Africa has been more subdued this week with a few cargoes being quoted and again a gentle drift upwards in rates. However a burgeoning tonnage list means that any reasonable gains are either eaten up but the cost of bunkers or aggressively pursued by owners looking for a realistic income. Sadly neither the AG nor West Africa can be said to offer that. The Indian charterers have fixed Caribbean/west coast India off mid/September at US$3m and just below, US$2.8m for West Africa/west coast India. We are currently rating West Africa/east coast India at low US$3m level. The 30 day availability index shows 55 VLCCs arriving at Fujairah, of which, seven are over 15 years old compared to last week’s total of 60. It’s purely supply vs demand which is keeping rates low and only a significant increase in cargoes coming from the Arabian Gulf or an owners hiatus on fixing will change the status quo. So far the first decade of September, only 25 fixtures have been recorded, this is of great concern for owners because this will mean 20 VLCCs will remain into the 2nd decade" Braemar said.
SUEZMAX
In the Suezmax market, "the West Africa market has been kept relatively simple this week, a long tonnage list and a small number of fresh cargoes helping to maintain the status quo. West Africa runs to US Atlantic coast & UK Continent Mediterranean (UKCM) have sat at ws57.5 and those to the Gulf have duly hit ws55.0. Once Charterers felt the numbers of cargoes were too high they held off and drip fed in the remaining ones. With rates (and earnings) clearly at the bottom there has been no need for the charterers to remain patient and they have been fixing with decent regularity through the week. The dates are stretching forwards well into the second decade and the odd sniff into the third and one would suspect that the charterers will behave in a similar fashion until they start feeling some pressure. There are a number ships still available for first decade dates and even a couple for august dates and this extra slack in the list will need to be taken up before there is any chance of any improvement in the rates. We would expect to start seeing an improvement in rates as we move from summer into autumn but as of yet we have no signs of that result. The real problem remains the oversupply of ships and with no other market really drawing the owners attention we could be in for a long couple of weeks" the report noted.
Finally, in the Aframax segment, "there was a glimmer of hope for owners in the Baltic this week with a charterer reported to have paid ws65.0 for an end of month replacement Primorsk fixture. However, this was the only blip in an otherwise quiet and depressed week of ws60.0 fixtures. With the holiday approaching, any hope owners had has disappeared and anyone left with early ships will be likely waiting until next Tuesday before any fresh enquiry appears. Cross North Sea is equally flat with rates unchanged from last week at 80kt x ws85.0 The Mediterranean and Black Sea markets have continued through this week exactly where they left off last week. There have been some fixtures reported, but largely the business fixed has been done off market with charterers picking off their friends nice and quietly. Rates remain unchanged at ws77.5 for cross Mediterranean and ws80.0 for Black Sea loading. So far, August has been a terrible month for owners and we can’t see the final week being any different. An uneventful week in the AG with sentiment flat and AG/east rates maintaining around ws93.0 in part due to higher bunker cost but also due to fewer ships ballasting back from the Far East. A handful of tenders in the AG and Red Sea up to the 1st decade of September are yet to be awarded due to Eid holidays and one charterer is struggling to find suitable tonnage for an AG to Red Sea off early September dates. A measure of positive sentiment has trickled down from the Suezmax sector with two or more charterers looking to split million barrel cargoes but nothing has been confirmed yet. Indonesia/Far East was especially lively with charterers covering remaining end of August and early September stems at a brisk pace with rates firming up to low ws90.0s levels keeping owners sentiment bullish.
TD14 has also been busy with rates firming to ws87.5 giving a TCE of about US$4,100/day while back haul rates out of north-western shelf to north Asia have maintained high ws70.0s levels. Given the situation, supply and demand being balanced, high volatility in freight seems highly unlikely" BS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide