Asia tankers-VLCC rates under pressure on oversupply
Charterers set to split VLCC cargoes if owners push rates higher. Freight rates for very large crude carriers (VLCCs) are coming under pressure from a build up in ships waiting for new charters and depressed rates in smaller tanker sizes, brokers said on Friday.
"At the slightest attempt by owners to push rates higher, charterers can split the cargo into Suezmax cargoes for the same rate," an European supertanker broker said on Friday.
A VLCC can carry around 2 million barrels of oil while a Suezmax tanker can transport about 1 million barrels.
"I am surprised VLCC owners have kept the rates up for so long. Last week I would have predicted rates to drop. There is no sign of an improvement," the broker added.
Current VLCC rates are around $18,000 per day depending on route compared with about $6,000-$7,000 per day for a Suezmax vessel.
"Suezmaxes are doing really badly. Suezmax and smaller Aframaxes are pathetic. Rates for VLCCs are holding in the low 50s on the Worldscale measure. Owners have done a good job not allowing the market to fall below close to break-even levels," said Ashok Sharma, managing director of shipbroker BRS Baxi Far East in Singapore.
"One thing is in owners' favour -- the operating costs are very low due to lower fuel prices," Sharma said.
Bunker prices are about $300 per tonne from more than $600 per tonne in 2014.
However, a lack of chartering activity this week and poor rates in the smaller tanker segments had led VLCC owners to be worried, a second Singapore tanker broker said on Friday.
"The past three days have been so quiet. Owners are in a slightly panicked mode - not all, but some," the second broker said.
That came as about 120 VLCC cargoes were fixed to load crude from the Middle East with around five cargoes still to be chartered out, brokers said.
The Saudi Arabia loading programme for August is expected to be released on Monday, brokers said.
"There are a lot of West Africa cargoes for August loading, which should push rates higher for modern tonnage, but I don't know if this will make much difference for Middle East rates," the European broker said.
"There are a lot of ships - older ships and vessels coming out of dry dock that dampen rates," the broker added.
New vessel deliveries have also depressed rates, creating overcapacity in the market.
"Twenty-seven VLCCs have joined the fleet with another 26 to come this year - that's created mayhem," Sharma said.
That compared with a total VLCC fleet of around 700 ships at the start of this year.
Average VLCC rates so far this year are around $22,000 per day, nearly half last year's level of $41,490 per day, according to shipping services firm Clarkson.
"Average rates are sharply down from last year. I would be very surprised if the daily average creeps into the high $20,000s for this year," Sharma added.
VLCC rates on the Middle East-to-Japan route rose to W53.50 on Thursday compared with W51.75 last week.
Rates on the West Africa-to-China route were W55.75 on Thursday from W55.50 last week.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia dropped to around W89 on Thursday compared with around W91 last week.