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04-02-2019

Clearlake takes new VLCC on time charter amid spur in gasoil trade

Clearlake, the wholly-owned shipping arm of the Gunvor Group, has taken a newly-built VLCC on time charter of up to six months, which may be used to move gasoil in its maiden voyage, market participants in Tokyo, Singapore and Seoul said.

At least half a dozen new build VLCCs and up to four Suezmaxes or LR3s have been taken by various trading and refining companies in different charters in the last few weeks to move gasoil in westbound voyages from North Asia, they said.

The VLCC will be delivered ex-yard to Clearlake any time in the next few days and will be redelivered in the West, after the charter period is over, said a broker familiar with the developments.

Some of the market participants said that the VLCC is the 319,000 dwt, Olympic Lyra, currently near Ulsan, South Korea, which has been chartered out at $25,000/d but Clearlake couldn’t be immediately reached for comment.

Chartering ships for moving cargoes and storage involves stringent vetting to ensure they are suitable to load and discharge at designated ports. At times, VLCCs are taken tentatively only to be released and replaced by others. Tentative deals, which can be canceled, are called, “placing on subjects.”

Asia is now heavily surplus in gasoil and most of these volumes will move to Europe in the run-up to the implementation of new marine fuel regulations of the International Maritime Organization, or IMO, said Ralph Leszczynski, Singapore-based director for research for Banchero Costa, a global shipping brokerage and consultancy.

Under these IMO regulations, it will be mandatory globally to use marine fuels with up to 0.5% sulfur content from next year compared with the current 3.5%.

“We are moving into a situation where Europe will be surplus in high sulfur fuel oil and deficit in low sulfur fuels,” Leszczynski said.

A substantial portion of this demand will be met by moving marine gasoil from North Asia to Europe, he said.

Economy of scale warrants that larger parcels are moved in single voyages and it is here that new build VLCCs and Suezmaxes assume importance, said a tanker broker tracking such deals.

It has been a long standing tradition running into several years, of new build VLCCs moving gasoil in their maiden voyages, to avoid ballast costs. After South Korea and China stepped up production of super tankers in their shipyards, it has been fairly common for these ships to move cargoes from North Asian storages for refining and trading companies and do floating storage in Africa.

However, the trend has assumed additional importance in the run-up to the implementation of the new sulfur cap on marine fuels, which implies larger volumes of trade in MGO.

China’s recent announcement of new export quotas for oil products, including gasoil, have also given a fillip to this trade.

At the same time, the falling VLCC freight rates amid ample supply is also supporting the trend, said a dirty tankers’ broker in Singapore.

Daily VLCC earnings on the Middle East-North Asia routes has slipped below $22,000 while recent six-month time charters with storage option have been closer to $25,000, another broker said.
Source: Platts

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