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Tanker Market - Jan 13

Source: OPEC_RP130109 1/16/2013, Location: Europe

In December, global spot fixtures increased by a slight 2% from the previous month to average 19.39 mb/d. OPEC spot fixtures saw a greater increase of 5.3% to average 14.54 mb/d, up by 0.74 mb/d from the month before. The increase was attributed mainly to higher fixtures from the Middle East to East, which increased by 1.07 mb/d to average 7.15 mb/d, while fixtures from the Middle East to East and fixtures from outside the Middle East both experienced drops, in comparison with November fixtures, of 9.5% and 0.4% respectively. On an annual basis, OPEC spot fixtures in December were 16% higher than the same month a year earlier, while Middle East-to-East and Middle Eastto- West fixtures were 8% and 35% higher than the previous year. Sailings from OPEC increased in December by 0.13 mb/d or 0.5% to stand at 24.38 mb/d, up by 4% from a year earlier. In the same line, Middle East sailings stood at 17.88 mb/d, up by 0.15 mb/d or 0.8% from the previous month and 1.9% higher than a year earlier. As for arrivals, North America and Far East arrivals increased by 10.6% and 1.2% respectively in December. Arrivals in Europe and West Asia dropped by 6.3% and 2.1% respectively and decreased annually by 2% and 0.2% respectively.

Spot freight rates for the dirty tanker sector saw a general increase on several reported routes in December. Average spot freight rates for VLCCs increased by 1.6% from a month earlier to stand at 42 WS points. Generally, VLCC freight rates were stable as the gains achieved in \ November were maintained in December. Also, the demand seen for VLCCs was adequate, although lower than what was usually predicted for the time of year, while Suezmax saw a greater increase of 12.3% from the previous month to average WS60 points. The increase in freight rates came as a result of enhanced tonnage demand for West Africa loadings. Other factors also contributed to shortening the positions list and thus balancing the vessel availability. On the other hand, Aframax showed a negative performance as its average spot freight rates declined by 3.6% from a month earlier to stand at WS87 points. The monthly negative average was a result of a mixed performance in December. While freight rates seen in the Mediterranean firmed as the positions list shortened, all gains were offset by the rates seen in the Caribbean, which dropped or remained flat, at best.

December started with VLCC activity waning as the market was relatively quiet for the time of year. Freight rates would have started to decline if it had not been for the owners who showed a constant resistance to lower rates, under pressure from charterers taking advantage of the market situation and its limited requirements. Despite improved circumstances in the third week of December, as a result of a pre- Christmas flow of activity, the increased inquiries caused only a marginal rise in VLCC rates as the sufficient tonnage supply, along with chartered efforts, prevented rates from achieving measurable gains, even given a healthier market situation. On average, spot freight rates for VLCCs operating on the Middle East-to East and West Africa-to- East routes saw close gains of 2.1% and 2.2% from the previous month to average WS48 and WS47 respectively. On the other hand, VLCCs operating on the Middle East-to-West route ended the month flat to average WS30 points, unchanged from the previous month. During the Christmas holidays, the market was quiet with no inquiries from the West. Generally, the number of fixtures in December was found to be low, indeed considerably lower than expected.

December was a fruitful month for the Suezmax class. Although the month started quietly, Suezmax freight rates were not able to register any gains as demand remained limited versus vessel supply. The beginning of the month maintained the same low rates as a month earlier, yet, by the second week, rates had picked up as demand for West Africa loading increased and tonnage availability was tighter for certain dates. Although the December fixtures were completed by that time, some prompt requirements were needed as replacements for ships running late, and these were done at higher rates, supporting the firming trend in the market. January inquiries came alongside the seasonal pre-Christmas rush, which gave a positive push to the market, boosting Suezmax rates. The upward trend was seen mostly in the west, as freight rates on the East-of-Suez routes remained mostly stable.

Tanker-owners did try to maximize the benefits of the seasonís demand by showing resistance to the existing freight rates in an effort to push them to higher levels, taking advantage of the balanced position list, the healthy requirements for Suezmax for West Africa loadings, and the usual winter season demand on the ice-class vessels. In December, some delays in the Turkish Straits supported rates. Spot freight rates for Suezmax trading from West Africa to the US Gulf Coast increased by 16.1% from the previous month to average WS65 points. Rates for vessels operating on Northwest Europe-to-USA routes rose by 8% from a month earlier to average WS54 points in December. Despite the monthly gain, on an annual basis average spot freight rates on both reported routes saw declines of 24% and 30% respectively. The firmer Suezmax market for West Africa loadings did affect rates on other routes, as charterers accepted higher rates to keep the owners interested in operating on different routes, instead of concentrating on a sole route. The spillover effect did have an impact on rates in Northwest Europe and the Caribbean. Rates in the East saw a slight improvement in December, as vessel availability was balanced, although remaining sufficient at all times.

The Aframax performance in December could not compete with other tanker classes in the dirty sector, although Aframax activity did increase on certain routes and freight rates did register some gains as well. However, the size of the gains was lower than expected for the time of year. Although the beginning of the month witnessed a sluggish start for Aframax in terms of inquiries and demand, things sped up later as charterers rushed to meet their requirements before the holidays. In December, Aframax spot freight rates were mixed, increasing on some routes, while dropping on others or remaining flat. Aframax tankers trading on the Indonesia-to-East route remained flat, with no changes from last month, to average WS92 points. Rates seen for the Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes rose by 9% and 11% respectively, on the back of a shorter positions list. In comparison with a year earlier, rates on both Mediterranean routes showed large drops of 40% and 44%. Rates on the Caribbean-to-USA route were negative, decreasing by 24% from the previous month to average WS90 points. Rates seen in the Caribbean were reported flat at best, as they did not pick up at any stage of the month due to limited activity. In general, supply remained abundant and therefore freight rates could not meet the expectations for the season.

In the clean sector, following last monthís surge in the medium-range market, December started with medium-range rates flattening across different routes, as demand thinned and freight rates softened accordingly. Yet, by mid-month, the market firmed as activity increased, in order for charterers to cover all their requirements before the holiday season. The increase in seasonal activity was translated into WS points gained on different routes. In a monthly comparison, all reported routes saw a positive performance this month as different elements supported freight rates, such as ships running late and last-minute replacements which narrowed the positions list and established better rates. Clean East-of-Suez spot freight rates gained 3.8% in December to average WS151 points, while the gain in West-of-Suez rates was 15.2% higher to stand at WS179 points. Rates for tankers operating on the Middle East to- East route increased by 5.9%, and rates for the Singapore-to-East route rose by 1.9% in December, compared with the previous month. Rates seen on the Northwest Europeto- USA route registered the highest gain to increase by 23.6% and average WS152 points. The Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes saw similar gains of 12.6% and 11.9% respectively.

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