The global tanker fleet is undergoing a significant aging process, a phenomenon driven by a confluence of factors that are deeply impacting its utilization and raising concerns across the maritime industry, reports Gibson.
Crude Oil
East (Middle East Gulf):
- VLCCs: A positive week with good inquiry for early June and some late May stems. Owners are confident in pushing rates higher due to increased OPEC production. Current assessments: AG/China WS63 and AG/USG WS32. A further uptick is expected next week with the confirmation of UAE stems.
- Suezmaxes: Inquiry has increased. Expected fixing levels are 140 x WS50 for Basrah/Med via C/C, and around WS90 for transit via Suez. Rates to the East have remained stable at around 130 x WS105.
- Aframaxes (Asia): Demand remains light with the fixing window moving into end-May. Vitol and Ampol are the main players testing rates for North and Australia-bound runs. Regional activity in the Indo region was almost non-existent as charterers aim for lower rates. Activity ex-Oz has increased for early June, and with the CPP (Clean Petroleum Products) market gaining momentum, Aframaxes might be in contention for those barrels. Overall sentiment is soft, with Indo/Oz assessed at 80 x WS112.5.
West Africa:
- VLCCs: Activity has picked up, and rates are improving, albeit slower than in the Middle East Gulf. Charterers are looking at forward positions, but owners are resisting, seeking similar returns to the AG. The lack of USG activity is a hindering factor. Current assessment: WAF/East in the region of WS63.
- Suezmaxes: The week started with a long tonnage list for the Atlantic basin, but steady inquiry from West Africa and the US markets has reduced this, helping to hold last-done levels. TD20 (West Africa to UK Continent) looks to have gained a couple of points, currently around WS87.5. Further gains are expected in early next week.
Mediterranean:
- Suezmaxes: Early June stems from CPC (Caspian Pipeline Consortium) were covered, but fixing levels remained flat at the conference level of 135 x WS110 for MED discharge. Tonnage is expected to be replenished next week, with some date sensitivity for early units.
- Aframaxes: The week began with charterers pushing rates down. A lack of Libya 20-25 window activity softened the market, with Libya testing down into the WS120s. A new low of WS117.5 was achieved for a Ceyhan run, and this level was repeated, indicating the market has found a floor. The tonnage list has been trimmed, but owners will need new fixtures or a strong 1-5 XMed window to recover.
US Gulf/Latin America:
- VLCCs: A disappointing week for owners due to almost no USG export activity, leading to declining freight rates despite improvements in adjacent markets. Ample June tonnage suggests continued downward pressure. However, Brazil export had an active week, with rates following a similar upward trend to West Africa. Current assessments: USG/China $8.20m & Brazil/China WS61.
North Sea:
- Aframaxes: Charterers have a good level of choice, putting owners on the back foot. Limited “bread and butter” business resulted in many vessels sitting spot or ballasting with little benefit. XNSea (Cross North Sea) is around WS110. The slip appears to be slowing, suggesting the market is near its bottom. Little change is expected next week due to continued ample vessel choice.
Clean Products
East (Middle East Gulf & Asia):
- VLCCs: It’s been a very positive week for VLCC owners in the East. Abundant cargo inquiries for both sizes (likely referring to LR1 and LR2) have significantly tightened tonnage lists, leading to substantial rate increases. TC1 (Middle East Gulf to Japan) is currently on subjects at WS140, with expectations for the next fixtures to reach WS145-150. Westbound stems have also been exceptionally busy, with a fixture on subjects at $3.92 million, and expectations for the next to exceed $4.0 million. TC5 (Middle East Gulf to Japan) saw a considerable rate jump to WS160 but has been repeated, suggesting stability until the next window opens. West runs require a fresh test next week, but for jet-suitable vessels less than 15 years old, expect rates around $3.2 million. Owners are optimistic heading into the weekend.
- Aframaxes (Asia): Demand continues to be slow (“drip fed”) as the fixing window extends into late May. Vitol and Ampol are the primary charterers testing rates for northern and Australian routes, amidst ample prompt vessel availability. Regional activity in the Indo region was almost non-existent this week, as charterers continue to push for lower rates. However, activity out of Australia picked up for early June, and with the CPP market gaining momentum, Aframaxes are expected to be competitive for these barrels due to the spread between the two sectors. Overall sentiment for the region remains soft, with Indo/Oz assessed at 80 x WS112.5.
UK Continent:
- MRs (Medium Range tankers): The week ended with mixed results, but owners are pleased with a slightly leaner tonnage list and renewed inquiry. The primary driver for this improvement has been low fixing rates of 37 x WS115, which has incentivized traders. With Copenhagen festivities concluding, the true busyness of the market is becoming apparent. West Africa remains quiet, but there’s some initial interest in ULSD (Ultra-Low Sulfur Diesel) movements, suggesting a potential positive shift for owners next week.
- Handies (Handysize tankers): It’s been an active week in the North, with continuous inquiry for XUKC (Cross UK Continent) stems. Early in the week, there was a healthy supply of tonnage, and rates traded around 30 x WS130 for XUKC, as owners recognized the need to clear out vessels to shift the market. By Thursday, TC23 (likely an intra-UKC route) firmed to 30 x WS135, and UKC/MED to 30 x WS125. The weekend break is needed to see if more ships firm up, indicating potential for further gains.
Mediterranean:
- MRs: A frustrating week for MR owners in the Med. Cargoes have trickled in, providing minimal buoyancy to maintain last-done levels of 37 x WS120 for Med-TA (Mediterranean to Transatlantic). The prospect of firming rates is challenged by the Med paying only marginally more than the North, which could attract ballast tonnage and put charterers in a stronger negotiating position. With the market trading sideways and much activity occurring behind closed doors, a fresh test is needed to determine true rate levels.
- Handies: A relatively positive and active week for Handysize owners in the Med, with rates gradually increasing from 30 x WS130 to 30 x WS142.5 for last-done fixtures. This increase is primarily attributed to a lack of appropriate tonnage due to age or undesirable history. Bullish sentiment has been sustained, with owners confident of further gains. However, this hinges on an increase in inquiry coupled with suitable tonnage. It appears both owners and charterers are in a standoff, awaiting further market activity before making their next moves.
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Source: Gibson
