Tug of war in VLCC Middle East market
Charterers hold back cargoes as owners start to delay offering ships.
VERY large crude carrier owners and charterers are playing out a game of tug of war in the spot market as a fine balance of ships and cargoes leaves each side wanting to take control of what direction rates move in.
A lack of modern, double-hulled VLCC tonnage in the Middle East has left charterers with little room for manoeuvre other than to hold back cargoes and cool market sentiment.
Owners, however, are well aware of the fact that little fresh tonnage will emerge in the first two weeks of March and are starting to hold back offers in the hope that rates will rise and they can achieve a higher price a few days down the line.
?It"s a finely balanced game. There"s hardly any slack. And although charterers are trying to hold back and they have the ball in their court as they release cargoes into the market, the owners are optimistic and are just gradually pushing rates up,? said one London-based broker.
?Obviously, if the charterers push too many cargoes into the market too quickly that adds momentum which the owners will be quick to take advantage of, and use it as leverage to push the market higher. If charterers withhold their inquiry it gives them the chance to keep things under control.?
Yesterday afternoon another London broker said a cargo was being worked at W80 for a Middle East to Asia voyage, up from around W65 last week on the same route, with talk that the next deal concluded could be ?well above W80?.
This helped time charter equivalent earnings on the Baltic Exchange benchmark TD3 route, shipping 260,000 tonnes of crude oil from Ras Tanura in Saudi Arabia to Chiba in Japan, rise to $41,500 per day, compared to $23,000 a week ago.
Although these higher prices were being circulated amongst the market, the last done fixtures from earlier in the week were slightly lower at W75. At this rate, HMM reportedly took the 2009-built, 318,000 dwt Jiu Hua San for a Middle East-to-South Korea trip loading on March 6, while charterer ZZR booked the 2009-built, 298,000 dwt Chang jiang Zi Hui for a trip to China on March 5.
These counted towards the 23 fixtures already booked to load in the first 10 days of March, with around five to seven left to be covered, London brokers said. Moving further forward, a couple of cargoes had been booked to ships in the second decade, March 11-20, with around 25-30 still remaining.
There are plenty of ships available to load in the Middle East, but a significant number are single-hulled, which are less desirable.
In contrast, demand for double-hulled tonnage is much greater, and with Imarex Asia estimating that there will be only around eight to 11 double-hull VLCCs able to load in the first 10 days of March, followed by around 30-38 in the second decade, there is unlikely to be surplus tonnage in the market.
?Owners are definitely in a positive frame of mind with this situation, but we have to wait and see whether they can convert that into any further noticeable gains,? said one broker.
?There"s definitely potential. The spike in rates during January to above W125 will have left owners thinking about whether they can revisit those levels. The jury is out on whether they can achieve that but it certainly provides a forward ceiling for them.
?On the other hand, though, having only gone through that a month and a half ago charterers are going to be a bit more careful about how they handle things.?
An improving market in the western hemisphere would provide additional support to the Middle East, however.
?In the Atlantic, a slim VLCC position list, a limited number of ballasters and a firming suezmax market all helped to buoy up owners" rate ideas and mood,? Norwegian broker Fearnleys wrote in its weekly report.
Rival European broker Riverlake Shipping raised its West Africa to US Gulf route rate by 10 Worldscale points yesterday to W80, with time charter equivalent earnings jumping over $11,000 to $49,112 per day.
?With the suezmax market shooting up the way it has to W130, owners of VLCCs in the Atlantic will be looking to close that gap, so they"ll be looking to do higher than W80, maybe even asking for W90 for the next done fixture,? said a London broker.
Asian charterer CPC was reported to have booked the 2009-built, 300,000 dwt Georgios for a trip loading in West Africa on March 17, with discharge in Taiwan, at W87.5.