WEEK SEPTEMBER 2012 ISSUE Western MR market extends gains

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1 WEEK SEPTEMBER 212 ISSUE Western MR market extends gains USG The benchmark USG TA route gained 1 points this week to conclude at ws7. The positive movement came following a number of weeks of rather lackluster performance; August concluded with ws75 observed on the route before a decline in USG TA fixtures eased total ex USG activity against a rising level of available tonnage and saw rates drop to as low as ws6 at the end of last week. The earlier decline was largely attributed to idled refining capacity in the Atlantic basin due to the passage of Hurricane Isaac over USG area refiners (the aftermath of which continues to affect processing rates presently) as well as the explosion at PDVSA s Amuay refinery. The idled capacity shut the trans Atlantic diesel arbitrage, halting many trades of diesel to Europe not under term supply contracts. Simultaneously, fixtures to Latin American posted marked gains as importers sought replacements to volumes normally supplied by PDVSA. VLCC TCE 28k AG-USG + CBS-SPORE $15,7/Day +59% With fixtures to Europe starting to pick up more recently to the highest levels observed this quarter and to levels exceeding averages observed during 1H12 the overcapacity situation has started to improve. One factor boosting USG rates is the fact that units coming free off the USAC have been quite reluctant recently to ballast to the USG, where the oversupply of vessels higher number of waiting days than ideal. A week ago, we noted that a triangulated Cont USAC + USG Cont trading track yielded a TCE of ~$6,8/day versus a TCE of ~$7,/day on round voyage Cont USAC trades. We factor 2.75 waiting days for triangulated trades; increasing that number would negatively impact the TCE result. S MAX TCE 13k WAF-USAC $6,8/Day -18% 8 Weekly Ex USG MR Fixtures by Discharge Location 1H12 Average vs. QTD 3 Week Moving Average Others Far East Caribbean Latin America Europe A MAX TCE 7k CBS-USG $4,2/Day +56% 1 1H12 Ave P MAX TCE 5k CBS-USAC $11,9/Day +52% Continent The Cont USAC route gained 17.5 points over the course of the week to ws147.5 after further activity gains tightened positions as the trans Atlantic gasoline arbitrage remained open. The same factors which shut the diesel arbitrage have helped to support US gasoline prices. Activity remains strong, and further gains are likely to materialize during the week ahead particularly given upcoming seasonal refinery maintenance periods in the US. MR TCE 38k CBS-USAC $3,6/Day -29%

2 Spot Market WS TCE WS TCE VLCC Week Ago Today AG>USG 28 kmt 28. $(4,9) 27. $(3,8) AG>SPORE 27 kmt 4. $8,8 4. $11,6 AG>JPN 265 kmt 4. $8,3 4. $11,2 US Crude Stocks (EIA) Week y/y +8.4% WAFR>USG 26 kmt 42.5 $11, $14,5 WAFR>CHINA 26 kmt 4. $8, 41. $12,1 SUEZMAX WAFR>USAC 13 kmt 55. $4,9 6. $1, B.SEA>MED 135 kmt 55. $(1,9) 55. $(4) CBS>USG 13 kmt 62.5 $7, 65. $1,4 AFRAMAX N.SEA>UKC 8 kmt 85. $1,3 85. $11,5 AG>SPORE 7 kmt 115. $21, $24,4 CBS>USG 7 kmt 85. $2,7 9. $6,3 MED>MED 8 kmt 75. $1,3 75. $4,5 US Gasoline Demand (EIA) Mb/d Week y/y -2.6% PANAMAX CBS>USAC 5 kmt $12, $8,6 CONT>TA 55 kmt 17.5 $8,6 11. $1,8 ECU>USWC 5 kmt $26, $23,7 CPP CONT>TA 37 kmt 13. $7, $11,9 CBS>USAC 38 kmt 12.5 $2,6 15. $4,1 USG>TA 38 kmt 6. $(6,4) 7. $(3,1) AG>JPN 35 kmt 113. $3, $6,8 SPOR>JPN 3 kmt 12. $2, $4,8 AG>JPN 75 kmt 95. $12,8 97. $15,4 AG>JPN 55 kmt 118. $12, 112. $11,6 Time Charter Market $/day (theoretical) 1 Year 3 Years VLCC $19,75 $23,5 Suezmax $17, $19,75 Aframax $13,75 $16, Panamax $13, $14,25 MR $13,25 $14,25

3 THE TANKER MARKETS VLCC The VLCC market was largely unchanged this week as stronger activity as well as a longer than expected September Middle East program countered falling bunker prices to maintain last week s gains. Prospects for Chinese stimulus measures to accelerate infrastructure building combined with a progression in crude stockpiling have both increased immediate VLCC demand and modestly improved forward prospects. Indeed, against earlier expectations, the September Middle East program has proven relatively long at a total to date of 129 cargoes, which is much closer to the average of 132 observed during 1H12 than the much lower numbers observed for July and August. Combined with stronger West Africa activity, where a stronger program for October has materialized, the overall tonnage excess observed in recent months now appears to be scaling back. Middle East There were 28 fresh fixtures reported in the Middle East market this week. Rates to the Far East gained just over 1 point, w/w, to an average of ws39.75 as rates largely traded between the high ws3s and low ws4s. Average TCEs on the route gained ~$2,3/day, w/w, to an average of ~$1,/day. Rates to the USG were steady around the ws27.5 level. Triangulated Westbound trade earnings gained ~$2/day, w/w, to an average of ~$16,/day. The September cargo count now stands at 129 and with charterers having progressed into the October program some 28 such cargoes have been fixed to date. This leaves a further 38 4 October cargoes as likely remaining through mid month, given expectations for a longer program. Against this, some 45 units are projected to be available through midmonth dates, implying an excess of just 5 7 units (though this does not include units historically hidden). This represents a marked improvement from the excess units projected a week ago to carryover from September to October dates. On this basis, rates have the potential to post further gains during the week ahead, though recent corrections in bunker prices have improved earnings even despite the lack of movement in rates. Atlantic Basin Activity in the Atlantic basin decelerated moderately this week to just 11 fresh fixtures. Chartering interest shifted to the West Africa market, which led the load profile this week with fixtures in both directions. The stronger activity, combined with improved supply/demand fundamentals in the Middle East market, saw rates post an uptick with WAFR FEAST voyages posting a gain of 1.25 points, w/w, to ws41. TCEs on the route gained ~$1,5/day to an average of ~$1,4/day. The WAFR USG route was retested this week at ws42.5 a 2.5 points gain from last week s assessment. The gains were in line with gains to the Suezmax class as the stronger October program boosted Suezmax rates and made VLCC moderately more attractive than during recent weeks. Further gains in the Middle East market are likely to prompt stronger gains in the West Africa market by limiting ballast units particularly on the WAFR EAST route. The Caribbean Singapore route was steady at the $3.35m level with little change expected during the week ahead. VLCC Projected Deliveries/Removals 4 Present Fleet: Suezmax Projected Deliveries/Removals 32 Present Fleet: Aframax Projected Deliveries/Removals Present Fleet: Panamax Projected Deliveries/Removals Present Fleet: MR Projected Deliveries/Removals 72 Present Fleet: 1,

4 Suezmax A further progression into October West Africa program saw the Atlantic Suezmax market post early gains. The WAFR USAC route gained 5 points to ws6. Further gains thereafter were offset by the fact that stronger Suezmax rates made the VLCC alternative more attractive and indeed two such fixtures on the WAF USG route did materialize, removing 4 Suezmax cargoes. Sustained activity is expected during the week ahead, but with bunker prices having dropped about 6% from a week ago, TCEs on the WAFR USAC route has gained 14% to ~$1,/day, which may prevent further gains in the near term. Aframax The Caribbean Aframax market was volatile this week with rates ranging from ws85 to ws9 on the CBS USG route. Activity remained generally strong throughout, but the continued presence of sufficient units relative to demand has prevented the market from posting further gains. As of the close of the week, however, rates appear firmer; further activity gains could see rates ultimately post an improvement whilst easing bunker prices could offset potential rate gains by offering owners better TCEs at present levels. Panamax The Caribbean market remained weak throughout the week with positions expanding as units came free off the USG. As these units weighed on the market, rates on the benchmark CBS USAC route dropping 15 points to conclude at ws Projected OECD Oil Demand OPEC OECD IEA OECD EIA OECD Projected World Oil Demand The European market was more active, allowing owners to achieve a 2.5 point gain on the Cont USAC route over the course of the week to conclude at ws11. Corresponding TCEs are ~$1,8/day representing a ~$2,2/day premium over the Caribbean market. Sustained activity could thus prompt some owners to ballast from the Caribbean and ultimately moderate rate in Europe and prevent further losses in the Caribbean. OPEC World IEA World EIA World 13+kMT fixtures, YTD y/y Percentage Change (Middle East, West Africa & CBS/USG liftings)

5 REPORTED TANKER SALES Olympic Loyalty 33,184/93 Sumitomo DH Sold for $25.75m to undisclosed Greek buyers. Yiomaral 299,85/93 Daewoo DH Sold on private terms to undisclosed Greek buyers. Unit converted to DH 3/211. Khorfakkan 15,34/1 Sumitomo DH Sold for $33.m to undisclosed Greek buyers via auction. Taiyoh III 95,666/97 Imabari DH Sold for $8.5m to undisclosed Middle East buyers basis SS/DD due. FR8 Venture 74,65/6 New Century DH FR8 Pride 74,35/6 New Century DH FR8 Reginamar 7,312/4 Daewoo DH FR8 Endurance 5,655/7 SPP DH FR8 Endeavour 5,546/6 SPP DH Stena FR8 1 46,846/7 Sungdong DH FR8 Fortitude 46,763/7 Sungdong DH Sold en bloc for $146.m to Greek buyers (Alma Maritime). Rainbow Quest 47,221/99 Onomichi DH Sold for $11.5m to Indian buyers (Mercator). Sunrise Hamanasu 12,475/8 Samho DH Ice 1B Sold for $12.2m to Vietnamese buyers. 13+ kmt Fixtures AG/West kmt Fixtures AG/East kmt Fixtures WAF/West Budi Jasa 12,/6 Fu an FJ DH Sold for $7.8m to Chinese buyers (LAEnergy Ltd). Nipayia 8,742/97 Usuziki DH Sold on private terms to Vietnamese buyers (STS Petroleum & Logistics). Samho Spinel 5,657/8 Samho DH Sold for $7.8m to undisclosed South Korean buyers via auction kmt Fixtures WAF/East

6 REPORTED TANKER DEMOLITION SALES India Viking Star 33,644/81 8,828 LDT DB Sold for $453/ldt. China Jin Hai Shun 6,264/84 6,264 LDT SH Sold on private terms. $55 $525 $5 $475 $45 $425 $4 $375 $35 TANKER DEMOLITION VALUES, $/LDT /212 weeks Bangladesh China India Pakistan FOR THE LATEST MARKET DATA AND NEWS GO TO: George P. Los, Senior Market Analyst Charles R. Weber Research Charles R. Weber Company, Inc. Greenwich Office Park Three, Greenwich, CT 6831 Tel: Fax: research@crweber.com