Supertanker Freight Rates Back on Track

Wednesday, May 02, 2001
Freight rates for supertankers to Asia, which last week suffered their most serious decline in over two years, have now stabilised and look set to recover, tanker brokers said on Wednesday.

One London broker referred to a VLCC fixture, the Lyria, on Monday to South Korea at W47.5 ($0.80 per barrel) as an exception to the market and the lowest point that it would go.

"That fixture of the Lyria we can say marks the bottom of the market and we'll see a gradual recovery from here," he said.

He pegged eastbound trades from the Mideast Gulf at W57.5 ($0.97 per barrel) and westbound trades at a similar level on worldscale, equating to $1.67 per barrel.

Another broker said that after Golden Week in Japan, holidays in Asia and May Day in Europe the market would take a while to warm back up.

"Charterers will probably now play it tactically," he said. "They'll drip-feed their cargoes onto the market rather than let them all go at once."

The slump last week saw the market losing W10 ($0.17 per barrel) overnight on Wednesday on a single cut-price fixture at W58, which took the market to a 13-month low.

This represented a 41-point ($0.69 per barrel) slump in the space of a month - the most serious in over two years -- which brokers put down to too many tankers in the Mideast Gulf chasing too few cargoes.

London brokers said the Lyria fixture at W47.5 was never really representative of the true state of the market because of the tanker's age.

"There are discounts for older ships, and that's what happened here. The Lyria was a 1977-built ship, but some would say it was still discounted too much," said one.

Another pointed to the fixture of the Taos by LG Caltex for a cargo to Korea at W75 as proof the market was much stronger than the Lyria fixture suggested.

One tanker analyst observed that a period of low rates should be welcomed by tanker owners. "At W47.5 the older ships will be losing money," he said. "It would encourage owners to scrap the older ships, and that can only be good for the long-term supply-demand balance."

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