Owners battle for survival as rates hit ridiculously low levels
RATES in the tanker market represent an unnecessary, unmitigated disaster as owners are stampeded into accepting ridiculously low rates.
Owners are so desperate to obtain business that they close their eyes to what is likely to happen and are now taking part cargoes for forward positions on brand-new vessels at rates that do not meet running costs.
Of a total of 19 tankers available between now and the end of the month, there are only three two-million barrel VLCCs (very large crude carriers) and one ULCC (ultra-large crude carrier that are acceptable to major charterers, making it hard to understand the panic actions of owners.
There are expected to be 54 vessels of 15 million deadweight tonnes available in the first three weeks of next month.
An identical number of fixtures and quantity of cargo was closed last week compared with the previous week.
However, rates have fallen at least five points, with the rate for a VLCC to the west standing at Worldscale (WS) 37.5, although a late report suggests one owner obtained WS 40 for a new vessel.
A mirror image is reflected to the east, with Singapore closing at WS 37.5 and the Red Sea at WS 38.5, while a cargo to Taiwan reputedly was arranged at WS 35.
There is still little joy for Aframax-size vessels in the Middle East gulf, where the latest fixtures indicate that a 90,000 tonner closed to Japan at WS 82, a 100,000 tonner to Australia at WS 80, and an 80,000 tonner to Singapore at WS 92.5.
The product market also still seems to be wallowing in the doldrums with little sign of any significant change.
However, the situation should improve after the UK and US bank holidays which should mark an end to the flat market and see good trade to Christmas.
Some areas have done better than others and, even though the Middle East market began slowly, enquiry from Japan, Korea and Western traders enabled owners to maintain the gains which they made during the previous week.
Despite rates falling five to 10 points in the earlier part of the week, they have recovered again and now stand at WS 155 for 55,000 tonnes from the Middle East Gulf to Japan, and are expected to remain firm for September as there are few large vesselsavailable.
Rates have also remained firm as charterers fix most of the remaining August vessels. Rates for 30,000 tonnes to India stand at WS 185 and, due to the lack of both old and quality tonnage, are expected to continue to firm.
The Mediterranean saw another poor week with rates dropping again as trading was slow.
Product tankers suitable for naphtha have also suffered with fixtures such as a 26,000-tonne, cross-Med or UK-Continent at WS 155 being representative.
Unfortunately, the fuel-oil market followed closely behind with owners barely hanging on to existing low rates and the rate for 50,000 tonnes cargoes of fuel oil from the Mediterranean to the US stands at WS 120.
Report supplied by London ship broker E.A. Gibson.