Spot VLCC freight rates for shipping crude from the Persian Gulf to the Far East breached the 200 Worldscale mark Friday with shipowners’ earnings racing past the $200,000/day figure for the first time in a decade, reports S&P Global Platts.
Bump for super tankers
The choking of tonnage supply due to US sanctions on China’s Cosco Dalian Tanker Shipping as well as ships sent to the dry docks for the installation of scrubbers, is causing charterers to jostle for super tankers to haul their crude cargoes.
This scramble resulted in VLCC freight rates jumping over 37% overnight as refiners and trading houses tried to secure ships even before the November crude cargo nominations were announced.
Persian Gulf-China freight rates
The key Persian Gulf-China freight rate powered to w205 Friday when charterer SPC provisionally hired the Dalian to move a 270,000 mt crude cargo from the Persian Gulf to Japan basis November 3 loading, according to shipbrokers tracking the VLCC market.
The owner of the Dalian, Dynacom Tankers, has confirmed the rate, while sources at SPC were not available to comment. Platts assessed the benchmark Persian Gulf-China VLCC rate at w150.
“All charterers are trying to grab a ship in advance even without the Persian Gulf term supply nominations for November have been announced. There are very limited vessels rolling over from October,” a charterer said.
The bullish VLCC market has registered a w100 point jump in the Persian Gulf to China freight in a matter of five trading days to touch w205 on Friday.
“By the end of next week, the market could be looking towards w300,” a source with a VLCC shipowner said.
He added that around 50 ships are out of the market because of US sanctions on Cosco and a similar number anchored at dry docks for scrubber retrofit in the wake of IMO 2020.
Tussel for Tonnage
The tussle for tonnage has resulted in the day earnings of VLCC owners racing to over $205,000/day on the benchmark Persian Gulf to China route at w205, while it was around $100,000/day when Platts assessed this voyage at w120 on October 7.
The last time earnings on a VLCC transporting crude from the Persian Gulf to the Far East had touched around $200,000/day was in early 2008.
A source quoted,”The Saudis have assured that production will come back to normal as well as the US is pumping more crude.”
“The teapot refineries are striving to fully use up the allocated crude import quotas and the winter demand is coming [soon]. All these factors are behind the firming of the VLCC market,” the source with a VLCC owner said.
Replacement tonnage or demurrage costs
The rush for ships before the crude loading nomination for November could be fraught with risks. According to a VLCC broker, charterers who have already taken ships may not be able to match the loading dates when crude stems are allocated.
This could result in charterers being forced to either re-let the ships they have already taken or find “replacement” tonnage or end up paying the demurrage costs.
“Charterers can’t afford to wait,” a VLCC broker said.
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Source: S&P Global Platts
