Freight rates fell on Wednesday in the America’s dirty tanker market, amid a stronger bunker fuel price, which is an unusual pattern.
Rising prices
Ex-wharf bunker fuel at Houston averaged $362.73/mt for the 15-day period ended Tuesday, $8.1/mt higher than the previous 15-day period.
All tanker segments, excluding VLCCs, have seen rates steadily decline this year, despite occasional upticks.
VLCC class vessels have held steady due to slightly shorter positions for February loading in the Caribbean.
S&P Global Platts assessed the Caribbean-US Gulf Coast route for Aframaxes at $6.98/mt Tuesday, near a 50-day low.
VLCCs were assessed at $14.07/mt for the Caribbean-Singapore route Tuesday, fluctuating within a $1/mt range, since the beginning of the year.
Slow Sailing
A shipping source from America says, that one method of reducing bunker fuel consumption is by reducing the sailing speed.
“A half knot reduction can lead to a rise in $500 [time charter equivalent],” the source said. “That’s about $25,000 in bunker savings.”
He also added that the reduced speeds can be negotiated on charter parties for any laden voyages.
Size Matters
Although Suezmax vessels were trading at near parity to the Aframaxes on local runs in the Caribbean, the larger tankers were feeling more pressure as they consume more fuel.
“We bunkered in Houston at $400/mt last week,” a ship owner said.
Earnings on the key West Africa-UK Continent run, a gauge for the strength of Suezmax markets, were paying paltry sums, he added.
“Round trip is $4,000/day,” he said.
Long-haul Suezmax which runs from the USGC, heading to Singapore, were faring better at $15,000/day, but with a long ballast journey back to a load region, it was far lower than it appeared, he said.
Out with the Old
Forty-nine dirty products tankers, out of a total 74 tankers, were sent to the scrap yards in 2017, and a forecast for demolitions in 2018 showed a similar pace.
A shipping report from Alpha tanker, forecasts a total of 94 tankers, including clean product tankers, were expected to go to the breakers in 2018.
“It is going to take a while” before scrapping would begin impacting rates, though, the shipping source said.
Impending ballast water management changes in 2019 and low sulfur fuel mandates in 2020 should see an increase in scrapping of older units, where the economics do not make sense to upgrade. However, questions linger on whether demolitions can keep up with the pace of new builds that coming online.
New builds lag behind
The first quarter of 2018 was expected to be one of the strongest in terms of deliveries of new builds since 2007, a report from Alpha tanker showed.
A shipbroker report shows, 57 expected VLCCs is due for delivery in 2018, besides 46 Suezmaxes, 48 Aframaxes and five Panamaxes.
Did you subscribe for our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Platts
