Ocean Freight Exchange News

300 students from Institute of Technical Education, junior colleges, polytechnics, and universities participated in the 6th edition of the Singapore Maritime Dialogue (SMD), which featured a lively panel discussion on the theme of ‘Maritime Singapore in the Age of Digitization’.The group exchanged views on the digital revolution taking place in the maritime industry with invited panelists comprising Guest-of-Honour, Dr Lam Pin Min, Senior Minister of State for Ministry of Transport and Health; Mr John Hahn, CEO and Co-Founder of Ocean Freight Exchange; Mr Richard Koh, Chief Technology Officer of Microsoft Singapore; and Ms Melissa Kee, Chief Human Resources Officer of Kuok Singapore Ltd.

VLCC rates from MidEast to Asia gain around $3,000; higher chartering volumes for peak winter season could lift rates. Freight rates for very large crude carriers (VLCCs) on Asian routes may have found a floor this week as a combination of increased chartering activity and some tankers sailing at slower speeds pushed rates slightly higher from the Middle East. "Rates are at a bottom, they have kind of found a floor," said Ashok Sharma, managing director of BRS Baxi Far East in Singapore, on Friday. "But the recovery is a very shallow one - the market is really rubbish," he added. Charter rates from the Middle East to Asia gained about 3 Worldscale points on the week to Thursday equivalent to an extra $3,500 in daily earnings.

Rates fall back after climbing earlier in the week. Overcapacity, OPEC cuts, little scrapping, summer lull weigh on market. Owners of modern very large crude carriers (VLCCs) could see a gain in charter rates amid tightening vessel supply but freight rates, especially for older and newly delivered ships, will remain under pressure, brokers said on Friday. That came as rates rebounded slightly earlier this week on routes from the Middle East only for them to fall back to last week's levels by Friday. Rates hit around 53 on the Worldscale measure after Unipec fixed four VLCCs at around W51-52. "We did see a slight upward correction but rates have fallen off again," said a Singapore-based supertanker broker. That came after S-Oil and Thai Oil fixed VLCCs at W43 and W44.50 on Thursday.

Middle East rates helped by fewer old vessels; about 96 MidEast cargoes fixed, 25 to come. Freight rates for very large crude carriers (VLCCs) could rise next week on firm sentiment in the Middle East and West Africa markets but higher oil prices and fewer floating storage opportunities could cap increases, brokers said on Friday. "Middle East rates to the east have crept up one or two points (on the Worldscale measure)," said Ashok Sharma, managing director of BRS Baxi in Singapore. "Rates are up to W52.50 today. There is a slightly firm undertone," he added. Rates from the Middle East are being partly supported by fewer older vessels that would otherwise discount charter rates due to age and plenty of cargoes from West Africa, brokers said. "Rates from West Africa are showing resilience.

MidEast-Asia rates likely to remain flat until August; paper derivative trades show no uptick until October. Freight rates for very large crude carriers (VLCCs) are likely to remain flat next week, a situation that could well last until August, brokers said on Friday. "Rates are stuck. I don't see there being any hope for July cargoes. Similar rate levels are probably here for August cargoes," a Singapore-based supertanker broker said on Friday. Current pricing of VLCC derivative futures for the Middle East-Japan route stood at 52.50 on the Worldscale measure for July. That falls to W49.75 for August, W49.50 for September and W54.50 in October. "That indicates much of the same rates story we've got now," the broker said. "There's been bits and bobs of chartering activity this week.

Unusually bloated gasoline inventories in the U.S. during peak summer driving season has kept the transatlantic arb barely workable. EIA data indicates that gasoline imports into the U.S. East Coast (PADD 1) for June averaged 549 kb/d so far, down by 15.4 percent m-o-m. As such, an atypical influx of LR tankers carrying gasoline from Europe have been fixed to the East in recent weeks. At least 6 LR2 and LR1 tankers loaded with gasoline are heading from the ARA region to AG/Singapore in June.

A new lease of life has been breathed into the ailing Medium Range (MR) tanker market in Asia. The MR market has been mired in a slump in recent months, with TC11 rates sinking to a multi-year low of $240,000 in April on the back of lower product exports from China and South Korea. The lumpsum rate for TC11 has since rebounded by $50,000 to $290,000 due an influx of activity in North Asia. Overall Chinese product exports touched a three-month low at 3.5 mmt in April, down by 22.6 percent m-o-m and 4.9 percent y-o-y which contributed significantly to the previous decline in MR rates.

The OPEC production cuts since the start of 2017 has tightened supplies of medium and heavy sour crudes, leading to a narrowing Brent-Dubai EFS. This has made long-haul crude trades from the Atlantic Basin to the Far East economically viable, resulting in a surge in flows from the North Sea as well as Americas which has in turn boosted ton-mile demand in the VLCC sector. Growing ton-mile demand has helped to halt declining rates in a sector flooded with newbuild deliveries in Q1. VLCC rates for the benchmark AG/Japan route rebounded from w46 end-March to current levels of w65.

As we enter Q2 2017, Asia’s crude tanker market finds itself flooded with a flurry of newbuilds that hit the water over the last quarter. According to Lloyd’s List Intelligence, new tonnage delivered hit 15m dwt in Q1 and is expected to stand at 8.7m dwt in Q2. The gradual but steady unwinding of floating storage in global hotspots due to a flattening Brent futures curve is likely to release a constant stream of tonnage into the market, exacerbating the situation of oversupply.

MidEast tanker rates fall to $22,000 a day, below breakeven; 52 VLCCs to be delivered this year, highest since 2011. Freight rates for very large crude carriers (VLCCs), which fell to four-month lows this week, face an uncertain direction next week as refinery maintenance and excess tonnage pressure rates even as owners resist moves by charterers to push rates lower, brokers said. Meanwhile, rates on routes from the Middle East and West Africa to China rose slightly this week after falling since Feb. 10. "I think there will be a shallow recovery over the next two-three weeks," said Ashok Sharma, managing director of BRS Baxi in Singapore.

VLCC rates on the AG/Japan route tumbled by nearly w10 points within a day to w60 on Tuesday, after news of S-Oil placing Australis on subs for an AG/Onsan run at w54.75, loading March 13-15 basis 274kt, broke. Charterers went for the jugular, with at least four older vessels fixed within the range of w55-w58 for an AG/East voyage. We believe that VLCC rates will remain depressed in the short term due to the upcoming refinery turnaround season in Asia, diminishing floating storage inventories that will free up more tonnage as well as OPEC production cuts.

Singapore gasoline cracks have averaged $10.72/bbl in February so far, down by 12 percent y-o-y but still relatively firm. Robust demand from the Middle East and intra-Asia as well as a flurry of both planned and unplanned refinery outages have been supporting gasoline cracks. ADNOC recently bought nine 27 kt cargoes over March-April delivery as its 127 kb/d RFCC remains shut from a fire. The shutdown of Pertamina’s 125 kb/d Balongan refinery and TPPI’s reformer in Tuban also led to firm buying from Indonesia, Asia’s largest gasoline importer.

The Asian Aframax market is currently stable but seems to be facing a more positive outlook on the back of short-term time charters as well as an increase in third decade cargoes. Rates for an Indonesia/Japan run basis 80 kt are hovering around w100 to w102.5, while rates for the AG/East route basis 80 kt stand at w115. Reflecting firmer owner sentiment, TD14 inched up steadily w-o-w to w100.78 which translates into daily earnings of around $8,700/day. At least three Aframaxes…

The Long Range (LR) 2 tanker market in the East of Suez has been languishing in the doldrums for almost two weeks. LR2 rates on the AG/Japan route, basis 75 kt, nosedived from w120 at the beginning of January to current levels of w80. Earnings for a round voyage on the benchmark route are hovering around barely breakeven levels at $2,000/day. A slew of refinery outages which have lowered CPP exports as well as a pile up of prompt tonnage in the region have culminated in the perfect storm.

China’s product exports in December eclipsed yet another record set in November, up by 23.8 percent y-o-y and 10.3 percent m-o-m to hit 1.27 mmb/d. The surge in exports can be attributed to Chinese refiners’ attempts to fully utilize their leftover export quotas for the year, as well as destocking ahead of the nation-wide switch to China V emission standards. The boost in Chinese crude throughput was also a contributing factor, as refinery production hit a new high of 11.3 mmb/d (up by 3.7 percent y-o-y).

Robust Asian gasoline demand has drawn more cargoes from Europe over the past week. At least five LR2 vessels have been fixed within the week to load 80kt cargoes of gasoline and gasoline blendstocks from NWE (mostly Mongstad) to Singapore. Gasoline from Europe typically moves to Asia on an opportunistic basis. The sharp increase in fixtures can be attributed to the recent surge in Singapore gasoline cracks. Singapore gasoline cracks jumped to an almost t10-month high last Wednesday…

In a stark reminder of how volatile shipping markets can be, sentiment in the previously weak Asian Aframax market has flipped while the LR2 market continues its downward slide. The Aframax market in the East of Suez firmed rapidly with rates for the Indo/Japan route up by w22.5 points w-o-w to w132.5 due to a flurry of pre- Lunar New Year activity. Among fixtures heard, BP placed a vessel on subjects for an Indo-Aus voyage at w132.5 basis 80,000 mt. Rates for the AG/East route gained by w5 points from the previous week to w115.

Asia’s crude tanker market faces the double whammy of a flood of newbuild deliveries and a cut in OPEC production in Q1 2017. On the supply side, net capacity growth is estimated to be around 5 percent for VLCCs, 9.6 percent for Suezmaxes and 7 percent for the Aframaxes/LR2 segment in 2017. At least 50 percent of the newbuild VLCCs and Suezmaxes will be delivered in Q1, worsening the oversupply of tonnage. On the demand side, OPEC’s planned output cut of 1.2 mmb/d starting January will lead to less crude export cargoes with the VLCC segment bearing most of the brunt.

The medium range (MR) tanker market in the North Asia has firmed this week, with rates recovering from last month’s lowest levels in 2016 as charterers rushed to fix an influx of fresh cargoes before the holiday season. Rates for the key South Korea-Japan route grew by $20,000 w-o-w to $290,000 while rates for the key South Korea-Singapore route jumped by $75,000 w-o-w to $380,000. Rates for the key Singapore-Japan route basis 30kt were up by w17.5 points w-o-w to w125 points. Robust winter heating demand, increasing Chinese product exports as well as weather delays lent support to MR rates.

The Asian Aframax market has been strengthening steadily, with rates for the Indo/Japan route up by w25 points w-o-w at w135. The Baltic Exchange’s benchmark TD14 route reached w127.50 Tuesday, jumping by w29 points w-o-w. This is partly due to underlying seasonality as refiners in the region typically raise utilization rates during Q4 in order to meet winter demand. An early and colder-than-usual winter in North Asia has led to increased heating fuel demand, lending further support to refinery runs.