The downward spiral on Americas clean tanker markets since early May has some clean tanker owners attempting to rebalance the market by sitting vessels, as time charter equivalent values turned negative and voyages are getting to be money-losers.
A marked lack of arbitrage opportunities for ultra low sulfur diesel to Europe — as strong demand for diesel to markets on both the west and east coasts of South America has been pricing this product out of markets across the Atlantic — have reduced trade flows on the backhaul US Gulf Coast-trans-Atlantic to term volumes.
At Worldscale 67.5 ($10.75/mt), freight on the US Gulf Coast-UK Continent run has reached a low not seen since October 26, 2016, according to S&P Global Platts data Thursday.
In the face of high IFO 380 CST bunker prices with the six-port global average indicated by Platts at $442/mt, time charter equivalent levels ranged at between minus $4,250-$4,350/day, while triangulated TCEs for the front-haul UK Continent/backhaul USGC-UK Continent routes were heard at below $1,800/d, a level that did not turn any profit, according to shipowners.
The global six-port averages includes the major ports of Houston, New York, Pireaus, Rotterdam, Fujairah, and Singapore. TCEs are based on an average Medium Range tanker bunker consumption of 29 mt/d steaming at 13 knots.
Bunker consumption for ECO-design vessels, which make up around 28% of the current product tanker fleet, would be close to 20% less, according to knowledgeable shipping sources.
At a lump-sum freight of $290,000 for the USGC-Caribbean route, a rate not recorded by Platts since last October, and $165,000 lump sum for the USGC-East Coast Mexico trip, TCEs for non-Eco mode vessels ranged at between zero to minus $50/d.
Decreased gasoline and diesel imports into Mexico during the month of May, which fell 6.8% and 11% from April, respectively, according to Mexico’s Energy Secretariat, have helped swelling position lists for vessels opening on the USGC.
DECLINING EXPORTS TO MEXICO, BRAZIL SWELL TONNAGE
Shrinking USGC products exports to Brazil have also helped build the prompt tonnage overhang, as deadweight tonnage on route from the USGC to Brazil halved in May from April, to 748,129 DWT from 1,469,679 DWT, according to Platts trade flow software cFlow data.
A domestic trucker strike last month in Brazil was heard to have dampened demand to offload any type of cargo. Rising domestic prices coupled with increased competition from biofuel alternatives were believed to have kept downward pressure on sales and imports of those two products.
According to shipping analysts, the two-week forward available tonnage count exceeded 51 MRs and handysize tankers, including over a dozen prompt units, limiting chances of a rebound in rates.
By Thursday, tonnage opening on the USGC should have realistically added further units, but position lists showed a contraction from over 52-55 vessels in the 10-day forward window to slightly under 50 MR and handysize tankers.
“Hiding, sitting, and hoping to be tapped quietly with a quiet look at a cargo,” said a shipbroker, referring to shipowner strategies to keep vessels off position lists in an attempt to not depress the market further.
“If you make zero or less a day sailing you might as well take out all the risk and just sit it,” a shipowner said. “People can’t afford to sit [their vessels], when the market is $20k per day, but at zero a day the cost of sitting is nothing.”
Voyage economics change from vessel to vessel. Shipwoners of ECO-design vessels, such as Scorpio Tankers, which has 109 owned ECO product tankers on the water with an average age of 2.8 years, can be more competitive in the voyage charter market and induce losses for owners of 10-15 year old tankers with higher fuel consumption, when the ECO fleet is still breaking even.
“Some of these ships use over 30 mt/d and so they are definitely losing money at these rates,” a shipbroker said.
Some shipowners were heard sitting their vessels for short periods of time as a short-term remedy to see whether demand will build and support freight rates.
“We sat one last week already,” a pool operator said. “I hope others do the same.”
While not yet a structural means, such as laying up a vessel and having it watched by a service provider, a five-day waiting period is hoped to achieve better overall returns, according to a shipping analyst.
“We are in unchartererd waters,” a shipowner said.
Source: PlattsPrevious Next