Gibsons News

In 1978 Allied Shipyards of North Vancouver built a series of three big steel purse seiners that have become much-admired classics amongst the excellent fleets of British Columbia. In the years since the boats have changed owners and changed names. One, the Viking Star, has even shifted from being a dedicated purse seiner to a transport vessel for salmon farms for the Walcan Seafood plant on Quadra Island.The success of the design, of which more than a dozen were eventually  built…

There has always been a compelling story being told about how larger product carriers are the future, in particular the LR2s, says Gibsons Weekly Tanker Report. However, the sector has had a particularly challenging few months, with little optimism regarding a sustained recovery in earnings. The LR2 story centered around the expansion of refining capacity in the Middle East, capacity reductions in Europe and wider product imbalances driving long haul trade. In some regards that story delivered. Despite these issues, the main driver behind the LR2 story (Middle East export growth) largely deliveried, supporting a period of strong LR2 earnings. However, the growth was always going to be finite as exports plateaued into 2016, whilst fleet growth started to excelerate.

Tanker markets cooled as Asian holidays took the steam out of recent strength, but some brokers saw it starting to simmer again last week. Holidays in Japan and Korea this week coincided with the end of most charterers' May programs, brokers said May 5. Approximately 18 VLCC fixtures of five million tons were reported in the Middle East Gulf, down from 22 of six million tons the week before, according to broker E.A. Gibsons. "However, there was sufficient momentum in the market to maintain rates at their previous levels," Gibsons said. With modern tonnage remaining in tight supply it was reasonable to expect rates to stay at current levels or even improve over the next few weeks, it added.

Bloated oil freight charges could surge yet higher this year, adding to the already inflated cost of world oil imports, shippers said. Tanker brokers are predicting a mid-November stampede to ship crude from the Middle East, pushing charter rates to new peaks amid a perceived shortage of quality vessels. In January, very large crude carriers (VLCCs) sailing from the Gulf to Japan were fetching a price of worldscale 49, equivalent to 75 cents a barrel. The rate since has more than trebled and now stands at WS 165, $2.50 a barrel. For a 250,000 ton, or 1.8 million barrel shipment, that means an increased freight charge of $3 million on a $50 million cargo of crude. "Eastern charterers have been paying higher rates," said one VLCC broker. Rates for a 280,000 tonner to the U.S.

Very Large Crude Carriers, which were scraping the bottom of the freight market at the end of January, look set to make a comeback as the pool of available tonnage runs dry. "We currently anticipate a maximum of 54 vessels within the area (Middle East Gulf) over the next 30 days, and it is significant that only 28 of these are modern," said London tanker broker Gibsons. "There is every indication that owners will capitalize on this shortage over the coming weeks," it added. The sentiment was mirrored by Oslo broker Fearnleys, which forecast continued high freight levels. Friday fixture lists showed eastbound VLCCs from the Mideast Gulf were commanding rates as high as W90, for example an SK fixture to South Korea, five points up on last Friday's market rate.

Caribbean tanker rates edged up a notch on Monday because of ongoing backlogs caused by last week’s weather delays, brokers said. “We saw W305 done today for 70,000 tons,” said a U.S. broker. “The fog has lifted but there’s still a backlog. Some ships are running... He said that lightering programs had also been affected. London brokers said that rates for million-barrel tankers continued to hold firm. London’s Baltic Exchange raised its assessment of the benchmark route from Nigeria to Philadelphia by 10 points to reach W163.5, or $2.15 per barrel. Brokers, however, said that Monday had been fairly quiet, and that the Baltic’s upgrade reflected gains made by the market on Friday. “It’s pretty quiet today, but I guess that’s just a Monday thing,” said a broker.

North Sea tanker rates have reversed a three-month decline and are now making significant gains, brokers said. "Everyone's come out of the woodwork to look for tankers for dates from the 20th (of March) onwards," said a London broker. He said that the market for Aframaxes (80,000 tonners) that usually ply the North Sea trades had been helped by the fact that the million-barrel tankers that had recently been competing for North Sea cargoes had now disappeared. London's Baltic Exchange has uprated its assessment of the benchmark route from Sullom Voe to Wilhelmshaven by a fifth so far this week to stand at W190 ($1.01 per barrel). Owners of Aframaxes last week took advantage of Italian legislation to push up rates in the Mediterranean.

Owners of Aframax tankers (70-80,000 tonners) have taken advantage of weather and Italian lawmakers to push rates up in both the Caribbean and Mediterranean markets. "Owners of modern Aframax tonnage trading in the Mediterranean received a long awaited boost to their fortunes, with news that Italy will insist on double-hulled tonnage being mandatory for most of its major ports," said London broker Gibsons. On the other side of the Atlantic, last week's weather delays were still causing a backlog, allowing owners to force rates up from W300 on Monday to W310 on Friday, as illustrated by Fina's fixture of the Nordlight from Covenas to the U.S. Gulf. U.S brokers said that the backlog had cleared, but not before the market had seen a high of W320 paid for one very prompt fixture.

Rates for Aframax tankers (70-80,000 tons) took a pounding this week, most notably in the Caribbean market, but elsewhere markets remained flat, brokers said. U.S. brokers said Orion's fixture of the 70,000-ton Astro Sirius from the East Coast of Mexico to the U.S. Gulf demonstrated the extent of the slump in the Caribbean market, which lost almost two months of gains to land at W215 on Friday. Last week, Oslo broker Fearnleys noted that the North Sea market was "primed for a beating" after several days of total silence. Rates fell 50 points last week and a further 20 points this week to below W180. Fixture lists showed the North Sea market being hit by an invasion of million-barrel tankers towards the end of the week.

Owners of VLCCs have been painstakingly building up rates this week, but for owners of million-barrel tankers, the last month's gains have come crashing back down. "(VLCC) tonnage is relatively scarce, especially for early positions, while enquiry is plentiful, and we expect some good times ahead from an owner's perspective," said Oslo ship broker Fearnleys. Westbound VLCCs from the Mideast Gulf gained five points during the week to reach W89, while eastbound VLCCs gained four points to reach W104. VLCCs out of West Africa saw plentiful enquiry at the start of the week, in part by moving in on million-barrel business, brokers said. Transatlantic VLCC freight on Friday was W117.

Shipping's most volatile market, the Caribbean upcoast trade, has seen rates cut in half over the last two weeks - a "bloodbath", according to Oslo broker Fearnleys. But other brokers were quick to point out that the market had bottomed-out and started to recover on Friday. They also observed that the slump was merely a normal part of the yearly cycle as Caribbean refinery turnarounds started to bite into the supply-demand balance. "At one point, rates for 70,000 tonners to the U.S. East Coast dropped below W140 ($1 per barrel), although... there appears to be some recovery with the last reported fixture at around W155," said London tanker broker Gibsons. At W140, the market hit a six-month low. As the plunge started to steepen on Tuesday, a U.S.

Tanker rates collapsed towards the end of last week as owners rushed to fix cargoes and move their Very-Large-Crude-Carriers (VLCCs) away from the Mideast Gulf where idle capacity was rapidly mounting. Brokers said they remained optimistic that rates would soon recover. "Last week proved to be another disappointing week for owners," said Oslo broker Lorentzen & Stemoco (L&S). The slump, which took the market back to 15-month lows of around W54 ($0.94 per barrel) for eastbound cargoes, was triggered by Far Eastern majors putting surplus capacity on the spot market while it was not needed during refinery maintenance programs. Owners of these "re-lets" had undermined the market by failing to stand their ground in negotiations, brokers said.

Charter rates for product tankers continued to be depressed as surplus tonnage kept a lid on rises last week despite an increase in business in several loading areas. The Middle East saw levels fall. Tankers carrying 25,000 tons into India were seen taking W165, the same for 30,000 tons to Japan. Larger ships carrying 75,000 tons to Japan were attracting around W120. Shipping brokerage E.A. Gibsons said there was sufficient prompt tonnage of LR 2s to indicate that rate may decline further. Increased chartering in the Mediterranean did not propel rates higher. Shippers said it was an all-too familiar problem of too many ships chasing too few cargoes. Rates for 30,000 tons of gas oil hovered around W110-120 with naphtha cargoes of 27,500 were able to secure carriage around W150.

Caribbean business proved the high spot in a quiet but slightly improved clean tanker market, brokers said on Friday, September 17. Renewed activity in the Caribbean markets pushed 30,000 ton cargo rates to the U.S. Atlantic Coast up by around 10 points to W185-190 by the end of the week, brokers said. One U.S. broker pointed to rates pushing over W200 early next week. The two hurricanes hitting the U.S. East coast were partially responsible for the rise, brokers said. Transatlantic rates also moved up to W165-170 for 33,000 tons, E.A. Gibsons said in its weekly report. They had risen from about W160. Long range 75,000 ton Middle East to Japan rates also inched ahead as predicted on thinner availability of tonnage. Rates rose to W125 from W120.

The downhill slide in freight rates for long range (LR) cargoes of petroleum products from the Gulf steepened last week as cargo awards failed to emerge, brokers said. Rates for LR-2s (75,000 tons) have been slipping since the start of June, losing about 15 points each month to reach W200 ($25.48 per ton) on August 10. But since then they have lost another 15 points in just two weeks to hit W185 ($23.57 per ton) at the end of last week, brokers said. Gibsons issued a rate warning for LR-2s at the start of August when it noticed a build up of tonnage within the Gulf. Signs of recovery appeared to be absent, with Oslo broker Fearnleys saying last week that most September cargoes had already been booked.

North Sea tanker markets tumbled to a one-year low by the middle of this week and have since fallen further still, brokers said. "There was virtually no Aframax (80,000 tonner) enquiry in the North Sea," said London tanker broker Gibsons. The transatlantic trade from the North Sea also fell. Despite one promising mid-week million-barrel fixture by Ultramar at W120 ($1.10 per barrel), Exxon subsequently haggled the trade down to W110 ($1.01 per barrel) for a Mongstad to U.S. Gulf cargo. Brokers described the Caribbean market this week as "brisk", but rates remained stable at W182.5 ($1.30 per barrel). It was the Mediterranean market that provided the greatest volatility.

Most tanker markets were still inching forward on Monday but the North Sea market was at the end of its rally and was starting to sag again, brokers said. "It's cooled off a little (in the North Sea), but we're hoping it won't fall too much further -- certainly not back to last month's levels," said a London broker. On Friday, shipping brokers Gibsons reported a weakening in North Sea tanker demand during the week and the prospect of further softening to come. "Thinner enquiry from the North Sea resulted in Aframax (70-80,000 tonner) rates softening to around W160 ($0.85 per barrel) for inter UK-Continent voyages and this downward trend will probably continue next week," it said in a market report.

Asian tanker rates started heading downhill this week after two months of stability, Singapore brokers said. "It's softened quite a bit since last week," said one clean tanker broker from a major international broking house. He pegged the benchmark route from Singapore to Japan at W285 ($18.67 per ton) for 30,000 ton cargoes. "Older tonnage, non-approved tonnage, might go for cheaper, say W280," he added. Brokers said the route had remained stable at W295 ($19.33 per ton) since the start of May, but fell to W290 on Friday before weakening further over the weekend. London tanker broker Gibsons warned on Friday of a downturn in clean tanker trades. "Until the volume of product to be shipped increases and longer haul trade returns, the forecast remains bleak in the short-term," it said.

Tanker markets soared into orbit this week for August loading dates, but remained dull and depressed for September loading, brokers said. London tanker brokers said late on Thursday that they were negotiating North Sea Aframax deals (70-80,000 tons) for August loading at W200, representing a rise of over 80 percent in the space of 48 hours. But September cargoes were fixed at a much more sedate W110. Shell paid W175 for a Statoil owned ship heading to the northern Europe, and brokers said on Friday that W180 ($0.96 per barrel) had also been done. There was no evidence of anything firm at W200. "It is reasonable to anticipate that further gains could be achieved for end month liftings," said London broker Gibsons.

Mideast-Far East crude oil tanker freight rates leapt skywards for the second day in a row as the Erika-effect took hold, shipping brokers said on Jan. 21. Japan-bound VLCCs added 10 Worldscale points to W65 ($7.00 per ton) in a two-day surge from W48 ($5.25). A rush of charterers to secure modern tonnage for February cargoes was squeezing the availability of quality ships in the region. "It is the Erika factor combined with a rush to fix February cargoes that has caused this spike in rates," a broker said. Structural failure is suspected for the TotalFina-chartered 25 year old Erika breaking in two in December and spilling viscous fuel oil on French beaches. Shipbroker E.A.

Large tanker rates slid back slightly off recent highs this week as Middle East September stems drifted to their conclusion, brokers said. VLCC rates for Japan, which peaked at W52.5 at the end of last week, slid back to around W50 while western rates fell back to about W47.5 from a peak of W50. Late week VLCC fixtures included two Bayoil charters for Bergesen vessels to the U.S. Gulf from Al Bakr at a soft W47-47.5 for well ahead October 10 and 20 sailings. Some brokers said expected October stems next week would mean a busier time with rates picking up, but Galbraiths noted that the Bayoil and two Chevron October charters at the same rates and similar October dates showed market weakness.