Asia Tankers-VLCC rates to hold steady on balanced cargo demand, ship supply

NOV 27, 20155:48 PM

[SINGAPORE] Freight rates in key Asian trades for very large crude carriers (VLCCs), which have fallen from a five-year high hit in early October, are likely to hold steady around current levels as charter volumes match supertanker supply, ship brokers said on Friday. "It's steady as it goes," a European VLCC broker said on Friday. "Rates are not going anywhere. Everyone had been looking forward to a US$100,000 a day VLCC market now, but I don't think it's going to happen," the broker said.

So long as rates keep around US$60,000-US$65,000 a day owners should not really complain, the broker added.

While breakeven costs vary from owner to owner, Robert Macleod, chief executive of top tanker owner Frontline, said the breakeven rate for each of its VLCCs was about US$27,700 per day for the rest of this year. "I think the market will move sideways until we see more chartering activity," the European broker said.

VLCC rates from the Middle East to Japan hit US$106,381 per day on Oct 5, the highest since June 2010, Reuters freight data showed.

But they have since slipped to around US$70,000 per day as more tankers are delivered and older vessels re-enter the market from maintenance and repair, brokers said.

Around 50 VLCC charters have been concluded for loading in the Middle East in December, a Singapore-based VLCC broker said on Friday.

That suggested another 60-70 cargoes for December loading have still to be fixed based upon charter volumes so far this year, Reuters freight data showed.

Several owners were holding back from leasing their vessels on Friday in the hope rates would rise next week, the Singapore broker said. "The market is well balanced. Owners have not really pushed rates this week. Low bunker prices are not helping," the Singapore broker said.

Low fuel prices meant shipowners who pay for their own fuel for ships trading on the spot market are less inclined to seek higher charter rates to offset bunker costs.

Freight rates for the Middle East to Japan benchmark route nudged close to 61.50 on the Worldscale measure on Thursday, up from W61 a week earlier.

VLCC rates from West Africa to China were around W67.50 on Thursday, against W67 the same day last week.

Rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia had climbed to W123 on Thursday, up from W102.75 last week on buoyant cargo demand, brokers said.

Clean tanker rates from Singapore to Japan continued to trend down to around W108.75 on Thursday, against W110 last week.

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