Without a doubt, the most impactful outcome of the IMO’s Marine Environment Protection Committee (MEPC 83) meeting was the creation of the IMO Net Zero Framework. This framework includes a Greenhouse Gas (GHG) Fuel Intensity (GFI) standard and economic mechanisms, notably a dual-level carbon trading system. This system mandates that vessels with higher emissions compensate for their CO₂ output, while simultaneously incentivizing ships that utilize low or zero-emission technologies through rewards, reports Gibson.
Crude Oil
East
- VLCC: Rates declined due to a slow second decade of May, leading to a significant carryover of tonnage into the third decade. The market was already under pressure from a quiet start after recent holidays. This lack of activity gave charterers an advantage, pushing eastbound runs below WS60. Further downward correction is expected next week due to weakened sentiment across most sectors. Current assessments: AG/China WS58, AG/USG WS29.5.
- Suezmax: The region continued to suffer from a general lack of inquiry volume. However, the limited fixtures maintained last done levels, with Basrah/Med runs via C/C expected to pay around 140 x WS52.5, and transit via Suez around WS90. Rates to the East remained stable around 130 x WS110.
- Aframax: Chartering activity picked up towards the end of the week but wasn’t enough to significantly reduce the Singapore tonnage list, despite some ballasters heading towards the AG. While the front end of the list improved slightly from the start of the week, the loading window has shifted into the third decade of May, meaning more idle days for owners amidst lower demand. Sentiment is currently sideways but could soften ahead of the Singapore long weekend. Assessment: Indo/Oz 80 x WS115.
West Africa
- VLCC: The pace of activity increased this week as charterers moved to cover early June stems, along with some remaining end-May requirements. This initially helped maintain rates, especially for tighter positions. However, rates began to decline as the week progressed, influenced by falling freight levels in adjacent sectors and a fear of further decline among owners. Current assessment: WAF/East in the region of WS61.
- Suezmax: The week opened with a lengthy tonnage list, allowing early traders to test lower fixing levels. This resulted in a 10-15 point drop on last done for TD20, reaching WS87.5 on subjects at the time of writing. With ample early tonnage still available, weak sentiment is expected to persist next week.
Mediterranean
- Suezmax: Drip-fed inquiry and increasing tonnage led to negative rate impacts. CPC was tested down to 135 x WS110 for Med and WS105 for UKC on multiple occasions. An upturn in inquiry is needed to stimulate the market and reduce early tonnage. However, end-month dates coming into play in the coming days should provide enough activity to hold sentiment steady for now.
- Aframax: The pre-bank holiday rush failed to materialize, and the tonnage list grew daily after the London reopening on Tuesday. Ceyhan cargoes started at WS170 but quickly fell to WS167.5, setting a downward trend. Libya loaders were concluded at WS162.5, and inactivity caused a further drop in Ceyhan to WS140 by the close. While the list is now more balanced with end-of-month activity expected, a significant rebound requires recovery in the States and North Sea markets.
US Gulf/Latin America
- VLCC: Owners in the USG had a poor week, affected by cargo withdrawals and declining rates on smaller vessel sizes in the region. An increase in eastern ballasters is adding pressure. However, owners are optimistic that the market is nearing the bottom of the cycle and anticipate more activity next week. Brazil exports were busy, but rates declined as charterers successfully pushed below the WS60 barrier. Current assessments: USG/China $8.50m, Brazil/China WS59.
North Sea
- The market saw a few handpicked vessels and scheduling activity, but lacked any significant drivers to change the current stagnant conditions. The prevailing sentiment suggests that a substantial shift is needed to move the market from its current rut around the WS125 level, with a higher likelihood of further depression before reaching equilibrium.
Clean Products
East (LR2 & LR1):
- LR2s: The LR2 market in the East has been active with numerous concluded and private deals. Publicly available information suggests rates for the benchmark TC1 route (MEG/East) are hovering around WS110-115, equating to a time charter equivalent (TCE) somewhere near $75,000 per day. Westbound voyages saw a dip to $3.2 million, but with fewer available ships due to off-market fixtures, a correction upwards towards $3.5 million is anticipated.
- LR1s: The LR1 market in the East has been less dynamic compared to LR2s. The TC5 route (MEG/Japan) has fallen to WS130, which translates to a TCE around $55,000 per day. Westbound voyages are being quoted in the $2.6-2.7 million range. Owners are optimistic about securing naphtha cargoes for the next loading window due to a limited number of suitable open vessels.
UK Continent (MR & Handy):
- MRs: This week in the UK Continent saw fluctuating fortunes for both owners and charterers in a shortened trading week. Rates on the TC2 route (NW Europe/USAC) initially declined towards WS120-125 (approximately $37,000 per day). However, some owners managed to push rates back up to the WS130 level. The prevailing sentiment by the end of the week points to a more accurate assessment of WS127.5 for TC2. The lack of quoted alternative routes, particularly from West Africa, suggests continued unpredictability in this market.
- Handies: The Handy-size market in the North has been uneventful, with limited cargo stems for both cross-UK Continent (XUKC) and UK Continent/Mediterranean voyages being released. The TC23 route (NW Europe short haul) has seen fixtures around WS135 (approximately $30,000 per day). However, with a significant oversupply of vessels compared to available cargoes, there’s an expectation that these achieved levels will be tested downwards in subsequent fixtures. The stabilization of MR long-haul freight is a positive for Handies, as it reduces competition from larger vessels on shorter voyages. A continuation of the current quiet trend is expected in the near term.
Mediterranean (MR & Handy):
- MRs: While the MR market in the Mediterranean isn’t excessively oversupplied, the pace of activity is slow, leading to a sideways trading pattern and a dampened sentiment. The majority of vessels coming from West Africa are opting for northbound voyages to the UK Continent due to better cargo availability. However, a potential shift is anticipated next week with Spanish refineries resuming operations, which could increase cargo volumes in the Western Mediterranean. For the most part, rate movements have mirrored those in the North.
- Handies: The Handy-size market in the Mediterranean concludes a rather stagnant week with rates lingering around WS130 (approximately $30,000 per day), indicating a level of acceptance between owners and charterers. Inquiry levels have been low, and a readily available tonnage list throughout the week has exerted downward pressure. With the typical summer slowdown now underway, both owners and charterers will be closely watching to determine the new floor for the TC6 route (Mediterranean short haul).
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Source: Gibson
