Tankers: Charterers take center stage ahead of pure ship owners, actively managing tanker fleet
Lower charter rates are forcing a change regarding the commercial management of the fleet. Shipbroker Charles R. Weber observed that charterers and owners evenly split the commercial management profile of the VLCC and Suezmax size classes. The charter rate during 2013 was low and picked up in 2014. Since then, the charterers have increased the share of the fleets under their management.
C R Weber indicated that this strategy is highly productive. The one‐year time charter rates for VLCCs were assessed at just $25,000/day. The average spot market earnings during the subsequent four quarters averaged 131% higher at approximately $57,795 per day.
Seasonal low
3Q14 the three‐year time charter rate was assessed at $30,000/day. Presently, the spot market earnings between then and have averaged ~$61,327/day. VLCC earnings are at the bottom of a seasonal low exacerbated by crude supply issues and stand at ~$22,858/day.
It is observed that even if earnings were to hold at the present level through the remainder of a three‐year TC, the corresponding $30,000/day rate would remain well below what the spot market earnings will have an average over the same period at $45,298/day.
C R Weber noted that after looking at the TC coverage of the top‐five most active charterers whose activities, they assesses as being largely speculative. They observed a lagging correlation of units TCed by these entities to movements in TC rates. The rates have now been declining. There is a sharp drop‐off in forward TC coverage.
The shipbroker noted that this was only expected. This is due to the extent of recent rate losses stokes being considerably less certainty as to the market position going forward. Speculation in terms of TC coverage often has as much to with managing freight market exposure as it does to pure speculation on the freight market itself.
Prospects
TC market could well be poised to observe stronger demand to keep TC coverage level with historical norms and take advantage of lower rates. The participants who believe the market will rebound in line with stronger refinery utilization rates during Q3 and Q4 (and as crude supply levels rebound from levels dragged down recently by force majeure and other short‐ term geopolitical issues) will be keen to lock into TC rates presently achievable which may no longer be so come Q4.
Prevailing condition
CR Weber noted that the rates plunged further down:
- AG‐FEAST TCEs had dropped to under $20,000/day for the first time since October 2014.
- Tonnage oversupply remained a key challenge and extended this week while demand levels dropped on a w/w basis.
- Combined Middle East and West Africa chartering demand was at a six‐week low. Middle East demand was off by two fixtures w/w to 18.
- The West African market was off by three fixtures w/w to just two fixtures – the lowest weekly tally in over three months. The slowing of cargoes meant that by the close of the week, at least one cargo had received nine offers.
- The August Middle East program has yielded 64 cargoes thus far, leaving an anticipated twenty uncovered through the second decade.
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Source: Hellenic Shipping
