Tanker owners have many reasons to cheer for

Saturday, 23 January 2010
As most analysts expected from the beginning of 2010 in their annual projections, the tanker market seems to be getting all the ingredients necessary for a swift recovery after a more than challenging 2009. Just this week, Mcquilling Services, a leading US-based business consultancy reiterated this notion, by releasing its latest tanker report estimates for the period 2010-2014.

The company said that it expects 2010 to see the beginnings of a recovery in the growth of international trade volumes, including increasing crude oil and petroleum products transportation demand. “Given the oil demand destruction seen in 2009, it will be at least until 2012 before oil consumption is back to 2008 levels. The long-awaited end-date for mandatory IMO 13-G phase-out of single-hull tankers arrives in 2010, with vessels not receiving Condition Assessment Scheme (CAS) extensions to be removed” the company said. But it also warned that excess tonnage supply continues to challenge a corresponding recovery in freight rates in the tanker sector.

We anticipate another year with a historically high number of new vessels slated to enter the trading fleet, overtaking exits and resulting in net fleet growth in 2010 across most sectors.Still, last week proved one of the best in months, especially for owners of larger crude tanker tonnage. In its latest weekly report UK-based Gibson said that after averaging just below $30,000/day in 2009, VLCC spot earnings (tce) on the benchmark trade from the Middle East Gulf to Japan (TD3) briefly spiked above the 100,000/day mark a few days ago, the highest level since early October 2008. On the same note, Suezmax daily earnings on the key route from West Africa to the US Atlantic Coast (TD5) ore than doubled from a monthly average of $25,500/day in December to a high of 66,500/day earlier this week, once again the highest level of returns in more than a year.

In its comment Gibson mentioned that “there are a number of factors behind such an impressive and rapid spike in spot freight ates for larger crude tankers. Generally, trading conditions in the VLCC market had been mproving during the last two months of 2009, with TD3 spot earnings rising from around 22,000/day in the first week of November to $47,000/day by the end of the year. Thus, themore finely tuned balance between tanker supply and demand by the end of 2009 (not least supported by ongoing floating storage) appeared to be the foundation which underpinned the latest hike in freight rates. As a result, only a minor extra push was needed to transform “just enough” tonnage supply into “extremely limited availability” the broker said.

It went further on to explain that such a push was offered by high levels of chartering activity out of West Africa and the Middle East Gulf in the first half of January as well as further weather related delays across the Northern Hemisphere. This resulted in rapidly diminishing spot tonnage availability, with spot tanker supply in West Africa becoming particularly tight. Suezmax tankers in West Africa also saw more opportunities, as charterers had to split cargoes into smaller parcels due to the lack of VLCCs in the region.Still, it appears that the market has peaked for now, with with both VLCC and Suezmax spot rates and earnings down from the highs reached earlier in the week, as charterers withheld enquiry from the market. “However, the spike that we have seen indicates how finely the market is balanced and how little it takes for rates to sky rocket. And we also should not forget that although the market is weakening, TD3 earnings are still at $88,000/day and TD5 earnings are at $42,000/day”, Gibson concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide