- No fresh fixtures, cargoes reported upon arrival of storm.
- Charterer queries prompt shipowner bullishness.
- Aframax freight rose to five-month high in week ended Sept. 10.
- Charterers turn to VLCCs to evade high Aframax, Suezmax rates.
US Gulf Coast Aframax charterer inquiry picked up Sept. 14, within a day after Hurricane Nicholas made landfall on the Texas coast, as queries emerged regarding replacement ships, after a muted start to the week, reports S&P Global Platts.
Fixtures on Sept. 13 & Sep. 10
However, no fresh fixtures were reported for the USGC-Transatlantic route as the market awaited further clarity regarding the impact of Nicholas, now a tropical storm, following no fixtures on any routes on Sept. 13. Market talk of two fresh cargoes and of three charterers asking about replacements, meanwhile, prompted bullish sentiment among shipowners.
The Americas Aframax segment in the week ended Sept. 10 saw a flurry of fixtures that strengthened freight to five-month highs and prompted charterers to upsize cargoes to VLCCs.
Freight Market Rates
Freight for the benchmark 70,000 mt US Gulf Coast-UK Continent route in that week saw a 22.16% week-on-week rise and a 37.49% increase over a period of two weeks, to be assessed Sept. 10 at $18.74/mt, or w110. The last time freight was assessed higher was in March.
The rise was due to tighter market fundamentals in the wake of Hurricane Ida, which made landfall on Aug. 29 on the Louisiana coast, and as charterers rushed to cover their early and mid-September stems. Sources said the tonnage tightened mainly due to increased cargo volumes, combined with port disruptions at the Mississippi River and reduced USGC crude production. At the peak of the production curtailment, 96% was shut in, according to S&P Global Platts Analytics.
The main driver of the increase in rates was just a “flurry of cargoes,” most unrelated to Ida, although the hurricane “certainly added to the hype early on in the rally,” a shipbroker said.
Aframax & Suezmax Charterers
Aframax charterers are typically able to find respite in the Suezmax segment when the smaller tankers become too expensive. However, tight Suezmax market fundamentals left charterers split between two expensive ship types.
As a result of short Aframax and Suezmax tonnage lists, charterers in the week ended Sept. 10 began upsizing what would typically have been 70,000 mt or 145,000 mt stems to 270,000 mt cargoes. They hired VLCCs, which usually specialize in exports to Asia and are rarely fixed for trans-Atlantic voyages from the USGC.
BP & Trafigura Climbing
BP and Trafigura on Sept. 10 were reported placing the VLCCs Pantanassa and DHT Tiger on subjects for the USGC-UKC/Mediterranean route at lump sum $2.5 million and $2.4 million, respectively. The laycan dates for the DHT Tiger were Sept. 15-20. The Pantanassa later failed on subjects in the week started Sept. 13.
“When both of those sectors (Aframax and Suezmax) are the same, charterers can’t flip over to the other for relief,” a second shipbroker said. “It got to a point where both sectors were climbing, so [BP and Trafigura] most likely saw the upcoming resistance and decided to get ahead of it and take VLCCs.”
Platts Sept. 14 assessed freight for the 70,000 mt USGC-UKC route at w110, roughly lump sum $1.31 million. Four such voyages on an Aframax would amount to lump sum $5.24 million. A VLCC was hired for the same voyage at lump sum $2.5 million. With additional costs for lightering services at lump sum $255,000 per Aframax lightering job, plus $27,000/d for lightering overtime, this would still be more economically favorable for a charterer than booking three or four Aframaxes.
Hurricane Ida’s Effects
In the weeks following Ida’s landfall, USGC refineries struggled to source heavy sour crude amid 96% of production shut-in, a source said.
This prompted an increase in East Coast Mexico-USGC voyages, with nine Aframaxes reported on subjects for that route in the week ended Sept. 3 and another six reported in the week ended Sept. 10. That was up from only two in the week that ended Aug. 27.
While US crude exports decreased overall in the weeks following Ida’s landfall, trans-Atlantic flows from the Gulf Coast continued despite shut production and port disruptions in the Mississippi River, as that trade flow is dominated by the light sweet crude produced in the Permian Basin and loaded off the coast of Texas.
As Nicholas blows across the east coast of Texas, market participants watch for potential impact on tanker flows and freight due to port closures and itinerary delays. Nearly all major Texas ports were closed Sept. 14.
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Source : S&P Global Platts