VLCC rates plummeting

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Wednesday, 04 February 2009

Average spot VLCC rates lost some 10 Worldscale points in a matter of a few days, Tankerworld data shows, as a lull in activity due to extended holidays exacerbated an ample supply of tonnage in the market. “Demand is just not picking up enough to support the tonnage list and rates [for spot VLCC fixtures] are plummeting,” said one broker to Tankerworld Tuesday.
“The sound of breaking ice is the sound of owners' line of defence showing some serious cracks,” said Bassoe.
Tankerworld data showed last Wednesday that VLCC rates to ship MEG crude to the east had slumped some 14 Worldscale points to an average of WS 50 since January 15.
Fearnleys said then that “if we take into consideration the number of cargoes fixed so far for January (about 100) and for February (about 33), and we examine the list of available tonnage, there is little to indicate that the downward trend will not continue.”
Latest Tankerworld data indicates that the M Star has just been fixed by LG Caltex to move 260,000 metric tonnes (mt) of MEG crude to China/Taiwan for loading on February 16 at WS 42.
LG Caltex also fixed the Front Duchess to move 260,000 mt of MEG crude to South Korea for loading on February 10 at WS 41.
As recently as Thursday two VLCC voyages to move 265,000 mt of MEG crude to China/Taiwan for loading on February 6 were fixed by Glasford at WS 52.
Gibson has pegged the MEG market currently to be at the low WS 40's east and low WS 30's west for double hulls with singles into the WS 30's for east discharge.
According to a Bassoe report Friday, VLCC earnings on MEG-East routes are already at a six-month low while voyages from West Africa to the US Gulf are hovering around six-month low levels.
“While activity should pick up again next week, reports of sharply reduced OPEC output are sure to weigh owners' minds, as is the significant build-up of available tonnage,” it said.
“The possibility of more vessels disappearing for floating storage appears to be the sole bright spot at present,” Bassoe added.
Source: TankerWorld