Asia Tankers-VLCC Rates Soar on Tighter tonnage

Posted by Joseph Keefe September 18, 2015

Mideast-Japan VLCC rates climb by $46,000 per day since Aug 26.

Freight rates for very large crude carriers (VLCCs), which reached a seven-week high this week, are set to climb higher on buoyant cargo volumes and tighter tonnage, brokers said.

But the views are mixed on whether rates will top $100,000 per day, the level that some brokers and owners think VLCC rates will hit over the fourth quarter on higher oil demand as Asian refineries ramp up production ahead of the northern winter after being shut for maintenance.

"I think rates will continue to firm but I don't think they will race away," said one Singapore-based VLCC broker said on Friday. "Rates (from the Middle East to Japan) are up to $70,000 per day. They may go through $80,000 a day - at that stage owners don't have to be that greedy," the broker added.

A daily rate of $100,000 would be the highest since mid-2010.

"Owners are feeling they are back in the driving seat and rates are firming for all major routes with Middle East and West Africa remaining the most active," Norwegian ship broker Fearnley said in a note on Wednesday.

"Possibly (it is) the start of the expected upturn for the winter months," the Fearnley note added.

VLCC rates from the Middle East to Japan have gained 34 points on the Worldscale since Aug. 26, when they hit a six-and-a-half year low. That is equivalent to an increase in average earnings of almost $46,000 per day.

On Thursday, VLCC rates for the benchmark Middle East to Japan route rose to near W62.75, up from W48.50 a week earlier, and the highest since July 29.

Supertanker rates from West Africa to China climbed to around W59.75 on Thursday, against about W49.25 the same day last week, and the highest since July 30.

This followed a flurry of early October cargoes pouring into the market, Fearnley and the Singapore VLCC broker said.

Rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia were trending down at around W94.50 on Thursday, about one point lower than last week.

Clean tanker rates from Singapore to Japan were around W146.75 on Thursday, down five Worldscale points from a week earlier.

"The softening tendency in the medium range market is still present," Fearnley's Wednesday note said.