All details given in good faith but without guarantee Deep Sea Tankers +44 (0)20 7535 2626 Dry Cargo Chartering +44 (0)20 7535 2666 Container Chartering +44 (0)20 7535 2867
VLCC There have been positive signs of life in the AG VLCC market this week as volumes have increased. The last two decades of October have produced just fewer than 90 cargoes, and 43 cargoes so far the first decade of November, with a few more to come. It is this volume which is thinning down the tonnage list and getting owners excited, which makes a nice change from reports of charterers being worried about owners' bunker credit. So we are back to operat-ing costs for VLCCs trading to the East, which increased early this week by about ws5.0 points. Trade to the West is up only about ws2.5 points, but the increased cargo volume is key. One can only imagine how much higher, with per-haps 10 percent fewer vessels, earnings could be. Only one fixture from W Africa was reported this week – 260kt W Africa/US Gulf at ws55.0 for mid-November loading. Meanwhile, W Africa/East cargoes have been concluded at 260kt x ws52.5, ws49.5 and ws56.0 over a 10-20 Novem-ber date range. There were no cargoes from W Africa from the Indian charterers this week due to Diwali celebrations. However, the firm sentiment being shown in the Atlantic prompts us to assess W Africa/WC India at US$3.3m and W Africa/EC India at US$3.5m. The 30 day availability index shows 70 double hulls and one single hull vessel, exactly the same as last week. So far, the month of October has produced 113 cargoes, and 53 for November. The freight rate for 280,000mt AG/US Gulf is ws35.0, ws2.5 points more than last week. With bunkers at US$659.5/tonne, US$7.5/tonne down from last week, owners' earnings are: Double Hull TCE: US$-7,900/day (US$-10,360/day last week) – calculated round trip laden at 14.5kts via Cape / bal-last at 16kts via Suez. The freight rate for 270,000mt AG/S Korea is ws55.0, up ws5.0 points on last week, making owners' earnings of: Double Hull TCE: US$14,160/day (US$8,700/day last week) – calculated round trip Ras Tanura/Yosu laden at 14.5kts / ballast at 16kts N.B. Owners can improve earnings by reducing laden/ballast speed.
Route Size Load Discharge Today’s Assessment Last Week’s Average
TD1 280,000 Ras Tanura LOOP ws35.0 ws34.5
TD2 265,000 Ras Tanura Singapore ws55.0 ws53.5
TD3 265,000 Ras Tanura Chiba ws55.0 ws53.5
TD4 260,000 Bonny LOOP ws55.0 ws55.5
TD15 260,000 West Africa China ws55.0 ws52.0
Long East61%
Short East27%
West12%
VLCC AG Monthly Spot Fixtures by VolumeFinal Destination (September 2011)
China16%
USA17%
Korea/Japan28%
Spore/Indo25% India
9%
S America3%
Med/Red Sea2%
VLCC AG Weekly Spot Fixtures by VolumeIntended Discharge (19th - 26th Oct 2011)
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Braemar Seascope Weekly Chartering Report 3
27/10/2011
It was a very disappointing end to last week, with the cargoes that were present in the market managing to fix at lower levels than previously seen. Owners managed to fight a little bit, however, so rate drops were slower than expected. With falling rates, charterers backed away from introducing fresh cargoes into the market, which only made owners even more nervous about where the rates were going. Moving into this week, the levels of activity increased again as charterers looked to complete the first decade in November and start moving into the 10-15 window. Charterers contin-ued to push rates further south, and ws85.0 was quickly fixed, followed by a ws82.5 and then onto ws82.5. By the time that batch of cargoes finished fixing, rates had dropped to ws72.5. Rather surprisingly for some watchers, this initiated some strong resistance from owners, who started pushing rates back up. This suggests that perhaps owners had al-lowed rates to fall too far in comparison to the amount of tonnage on the list. We saw rates move back up to ws77.5 for a US Gulf run, and with cargoes still outstanding, it looks as though the market will head back up above ws80.0 for US Gulf with the weak links having been taken out. It is slightly odd that we will be ending the week where we started, but the route taken took us through ws72.5. If there was one consistency in this currently volatile market, it was the length of delays going through the Turkish straits. These remained at 5-6 days northbound and 3-4 southbound throughout the week. After they saw ws150.0 on subs from the Black Sea, charterers backed off, fixing as they looked to take some of the heat out of the market. This had the desired effect and the next cross-Med cargo brought rates down to ws125.0. The following Black Sea cargo took something out of the market and fixed at ws142.5. When this had to be replaced, rates dropped further to ws127.5. This completed the first decade of November dates from the Black Sea, and with the reduction in cargoes, the next cross-Med cargo fixed at ws100.0. Consequently, charterers backed off completely in the knowledge that the next Black Sea fixture should be somewhere around the same levels. Historically this year, we have seen rates drop to ws62.5, but with delays as they are, it does not look likely that there will be much more down side to this current mar-ket. Charterers should come in and take advantage of the relatively low rates. Meanwhile, the constant prospect of weather delays in the Turkish straits threatens to fire the market up again. Novorossiysk was closed for three days this week, which has thrown the program into chaos, adding to the uncertainty. After last week’s busy market in the East, suezmaxes reverted to type with a slow week in the AG. There was a single Indian cargo that fixed the equivalent of 130kt x ws80.0 for AG/India. We also saw continued AG/West activity, although rates stayed fairly stable at around US$1.725m. The big story in the East for suezmaxes is the increased confidence in the VLCC market, which may yet have an impact on the suezmax market. We have continued to see ships ballasting round to the western market even though rates there have dropped away. This has led to a relatively short list of good quality suezmax tonnage out in the East, but is yet to be reflected in the rates which have stayed stable.
Suezmax
USA61%
NW Europe15%
S Africa8%
S America8%
Australia8%
Suezmax WAFR Weekly Spot Fixtures by VolumeIntended Discharge (19th - 26th Oct 2011)
Route Size Load Discharge Today’s Assessment Last Week’s Average
TD5 130,000 Bonny Philadelphia ws80.0 ws82.0
TD6 135,000 Novorossiysk Augusta ws100.0 ws125.0
135,000 Mediterranean UK Cont ws97.5 ws115.0
135,000 North Sea US Gulf ws70.0 ws82.5
135,000 Ras Tanura South East Asia ws80.0 ws80.0
W Africa40%
Med/Red Sea22%
Black Sea4%
AG16%
India East3%
Caribbean/EC Mexico
9%
S America6%
Suezmax Weekly Spot Fixtures by VolumeLoad Area (19th - 26th Oct 2011)
Braemar Seascope Weekly Chartering Report 4
27/10/2011
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Aframax
The North Sea/Baltic market has experienced a correction in rates these last few days, with more tonnage available, and charterers fixing way ahead again. Consequently, anyone left behind will once more be left in trouble just like last week, only this time without the Mediterranean market attracting the North Sea ballasters. Primorsk is now fixing in the mid ws80s, and the sentiment is downwards. The Mediterranean has maintained its decline to end the week below ws100.0 for cross-Med, with last done for Sidi Kerir/Italy at ws95.0. The Black Sea follows close behind as charterers hold back with their enquiry and the tonnage list continues to build up as previously delayed ships clear the straits and an influx of tonnage from the East and Con-tinent exacerbate owners’ problems. We expect the market to continue to experience further falls over the coming week.
NW Europe45%
Med/Red Sea40%
USA15%
Aframax (West of Suez) Weekly Spot FixturesIntended Discharge Area (19th - 26th Oct 2011)
Baltic42%
N Africa/E Med34%
Black Sea16%
UK Cont8%
Aframax (West of Suez) Weekly Spot FixturesLoad Area (19th - 26th Oct 2011)
Route Size Load Discharge Today’s Assessment Last Week’s Average
TD7 80,000 Sullom Voe Wilhelmshaven ws107.5 ws119.0
TD8 80,000 Mina Al Ahmadi Singapore ws110.0 ws109.0
TD9 70,000 Puerto La Cruz Corpus Christi ws107.5 ws109.5
It has been a very slow week for the LR2s. The only activity out of the AG has been Korean and Japanese contract naphtha liftings. Unsurprisingly, these have been snapped up by far-eastern tonnage. The LR1s remain the preferred unit for the jet cargoes moving west and as such there is pressure building on the fully coated, LR2 units. To compound the situation, unfortunately the gasoil arbitrage Far East/West is now shut and has taken with it the four or five questions/cargoes off first half November. The tonnage list basis South Korea was looking pretty tight at the start of the week. This should now bulk out as we go into November, especially as ballasting into the AG does not look appealing at the mo-ment. Rates are going nowhere fast and the market needs a kick start. There has been a small amount of activity this week for the LR1s. A couple of jet cargoes have been fixed West around the US$1.75-1.8m levels. Naphtha moving east is at a flat at ws110.0 as there is ample tonnage. Some life has been thrust into the MR market this week, and especially today. The tonnage list is much more evenly bal-anced, and assuming all of the vessels on subs get confirmed, next week could look a lot more promising for owners. There are still quite a few uncovered cargoes prompt to mid-month, mainly naphtha ex-WC India, which will pick the rates off the 35kt x ws140.0 floor. At the moment rates are flat but they will begin to rise soon enough.
CP
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Clean Products - East
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TC1 - 75 - Ras Tanura - Yokohama TCE
2009
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2011
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TC5 - 55 - Ras Tanura - Yokohama TCE
2009
2010
2011
Route Size Load Discharge Today’s Assessment Last Week’s Average
TC1 75,000 Ras Tanura Yokohama ws107.5 ws109.5
TC5 55,000 Ras Tanura Yokohama ws110.0 ws110.0
TC4 30,000 Singapore Chiba ws150.0 ws150.0
TC12 35,000 WC India Japan ws139.5 ws140.0
Braemar Seascope Weekly Chartering Report 7
27/10/2011
CP
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Clean Products - West
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30,000
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TC2 - 37 - Rotterdam - New York TCE
2009
2010
2011
0
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10,000
15,000
20,000
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TC3 - 38 - Aruba - New York TCE
2009
2010
2011
Route Size Load Discharge Today’s Assessment Last Week’s Average
TC2 37,000 Rotterdam New York ws180.0 ws151.0
TC3 38,000 Aruba New York ws170.0 ws163.0
TC6 30,000 Skikda Lavera ws155.0 ws153.5
In the Continent, it has certainly been a more interesting week for TC2 than has been seen for a while with steady fixing of vessels from Monday through to today. One of the driving factors has been tonne mile enquiry into Brazil for all grades. At least eight cargoes have been fixed on the Brazil/Uruguay/Buenos Aires route, with more uncovered out to the 10th November window. This in turn has turned States tonnage short, driving a strengthening on the back haul market, which again in turn has further firmed the NW Europe market. BITR assessment on Wednesday closed up ws28.0 points on the back of an anticipated surge, which was only realised on physical rates 24 hours later, with Repsol fixing on subs 37kt x ws180.0 for North Spain/trans-Atlantic off 7-9 dates. The outlook is firm as the States continues to maintain its tonnage levels and enquiry. However, some charterers, as already seen, have sized down cargoes too, which will only go to halt any runaway increase in TC2. This said, LR1 enquiry may well act similarly if TC2 rates move upwards, irrespective of certain disports/receivers being unable to take larger (LR1) vessels. This sector will still see charterers attempt to combine stems and maintain more acceptable dollar/tonne freight. We anticipated the Mediterranean market to continue with Friday’s downward sentiment and further soften due to a longer tonnage list. However, as the week progressed, the stronger TC2 market allowed many owners to ballast up to the Continent, thinning tonnage allowing rates to stabilise 30kt x ws152.5. Increased activity from the Mediterranean players, and an overall better expectation, leaves the market firmer at the end of the week at ws155.0. Expectation from owners is for better returns next week. The States market has gathered strength this week, and Brazil imports have played their part in this. Rates into US Gulf/UK Cont have firmed to 38kt x ws145.0, and Caribs up with ws177.5. Hype is still there, and tonnage is still shorter with delays in South America. However, enquiry is expected to level off and rates to go sideways for the next week.
27/10/2011
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Braemar Seascope Weekly Chartering Report 8
There was disparity between the two basins this week as the Pacific showed signs of coming off and support was found on trans-Atlantic and front haul routes. As it stands, the BCI is at 3481, down 84 and the average of the four TC routes is US$30,416/day a loss of US$507. The Pacific majors have managed to keep relatively quiet, and volume has remained low. Rates have been around the US$12/tonne mark despite prompt tonnage asking up to US$13/tonne at the start of the week. In the Atlantic, tonnage has remained tight. The trans-Atlantic RV rate is said to have been concluded at a voyage rate giving the equivalent of US$38,000/day, whilst the Tubarao/Qingdao rate has now broken the US$30 barrier. At the time of writing, rates have started to come off across the board. On the period front, rates have again improved, with US$18,000/day being fixed on a 180k dwt modern cape for one year, and US$23,500/day for 4-6 months.
Capesize
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125,000
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-Oc
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The Baltic Capesize Index vs Atlantic & Pacific Earnings
Atlantic Pacific BCI
Dry
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27/10/2011
Early November LMEs open near S Korea and Japan received better rates ranging between high-US$13,000-14,000/day levels for NoPac trips, but the rest of the Pacific market has been under strong pressure, with charterers’ enquiries coming in around low-US$12,000/day. The gap in ideas has widened in the last couple of days and there have been some suggestions of uncertainty in the direction of the market, but the overall sentiment remains negative with more tonnage expect in November. Continent positions still remain tight and are enjoying the firmest rates in the Atlantic. The list of vessels in the Mediter-ranean on the other hand has been building up steadily, and a few LME types have attracted the interest of some char-terers for short period business with redelivery Skaw/Passero range at levels very close to US$16,000/day. However, negotiations have slowed in pace, with rates generally easing in this region.
Braemar Seascope Weekly Chartering Report 9
Panamax
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The Baltic Panamax Index vs Atlantic & Pacific Earnings
Atlantic Pacific BPI
Dry
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27/10/2011
Braemar Seascope Weekly Chartering Report 10
Handysize rates have continued to soften this week, with a continued oversupply of tonnage open in Far East and South East Asia. Fertilisers from the Far East to India are still in demand and rates have remained firm for t/c trips in this direction. However, sentiment is weaker and supramax rates in the Pacific have fallen with interest for period t/c also dissipating. The Atlantic market on the contrary has continued to strengthen, which could possibly lead to some revived interest for period tonnage in the Pacific basin. The Continent has remained firm again, with supramax owners still able to achieve in the high US$20s for trips from the Baltic to the Far East. Scrap rates have also maintained firms levels as they have done throughout the month, with a 40k dwt vessel open in the Continent reportedly fixing at US$19,000/day to East Med. Signs of the market coming off have been quashed as we see a steady demand against still thin tonnage supply. The handysize market has tailed off this week in EC S America. We have seen fixtures region in the region of US$15,000-16,000/day from Brazil to UK Cont. EC S America to Far East is now fixing at low-US$20s, compared to the past two weeks, where we had seen closer to the mid-US$20 mark. The US Gulf market has seen the indexes and rates start to soften following an annual high seen in previous weeks. Despite 55k dwt 2005 build vessel rating US$38,000/day to Far East with petcoke, the rest of the market shows a differ-ent story. We are seeing cargoes being delayed as charterers hope this trend will continue. There has been less front haul business coming onto the market this week. The lowest level we have seen for front haul is US$34,000/day. Re-ported fixtures to the Mediterranean remain similar to last week between US$30,000-31,000/day. WC India remains steady, rates about US$16 for handymax on voyage basis for trip to China. Charterers are unwilling to consider only grabbers. In contrast, due to festivities in the east coast, the market is flat.
Handy/Handymax/Supramax
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The Baltic Supramax Index vs Atlantic & Pacific Earnings
Atlantic Pacific BSI
Braemar Seascope Weekly Chartering Report 11
27/10/2011
China to push for cheaper shorter-term iron ore contracts Rio Tinto expects its Chinese iron ore customers to push to shift to shorter-term contracts for iron ore as prices de-creased by 30% in the past month. Many argue that the gap between the spot price and quarterly contracts was not helped as Vale increased supply by redeploying ships bound for Europe to China. In the past quarter, Rio Tinto sold 14% of its third quarter production at spot prices, but this is expected to grow. Rio expects iron ore will account for around 70% of the company’s earnings this year. Last year the big three iron ore producers agreed to customers paying an average index price of the previous quar-ter, compared to a benchmark system based on annual negotiations. The industry standard may soon change again as Rio indicated a move to monthly contracts and BHP Billiton announced it is selling the bulk of iron ore on monthly prices. With September quarter profits up 7.5% from a year earlier, Vale is intending to offer steel mills in China lower prices for the fourth quarter than under previous quarterly contracts. However, the company still encourages the quarterly pricing system. Mining executives argue that the slump in price and China’s weaker demand will be short-lived as some mines in the northern hemisphere cannot produce iron ore in the winter. India eyes New Hope JSW Steel Ltd is interested in buying New Hope, valued at US$5.2 billion. The company is studying New Hope as-sets and may make an offer in due course. Indian resource companies and steelmakers have acquired more than US$3 billion worth of coal assets over the past 12 months to fuel India’s power and resource demands. India’s steam coal imports also rose close to 21m tonnes between April and September this year, compared to 12m tonnes a year earlier. Asia follows global trend with steel production up in September China’s crude steel production for September 2011 was close to 57m tonnes, an increase of 16.5% year-on-year. This helped increase Asia’s first nine month crude steel production to 728m tonnes, an increase of 9.5% compared to the same period last year. Atlas to reveal Pilbara railway in March 2012 Atlas Iron is expected to reveal its Pilbara railway plans within months, which will allow the company to increase its iron ore production. Atlas requires a railway to increase its annual shipments from 6m to 15m tonnes by September 2015. In the September quarter, Atlas shipped around 1.5m tonnes of iron ore out of Port Headland.
China agricultural output up in third quarter China’s wheat output reached around 126m tonnes this year, up 2.5% from last year. Rice output was also up 4.5% from last year, with the nation producing 32.76m tonnes. The Chinese government has released around 3.7m ton-nes of corn from its reserves into the market as it expects a plentiful harvest again this year.
Asia
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The Box Index B O X i
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27/10/2011
Braemar Seascope Weekly Chartering Report 12
Despite limited fresh enquiry, the market has been fairly active this week, although, as has become customary in recent months, fixing activity was dominated by extensions and replacements in what is traditionally one of the two busiest times of the year. An equally familiar theme was that many of these fixtures were typically either short term or flexible in length, with charterers still wary of failing to capitalise on further market falls and unsure as to volumes when looking beyond the short term. The panamax sector appears to have settled down, with rates remaining around the US$8,000/day mark, which is not far above the OPEX cost for this size. It is therefore unlikely the market will sink lower in this sector, at least for head-owned tonnage, as either laying up or lying idle would become more attractive options for owners if rates were below these levels. However, it will be interesting to see whether some of the growing amount of sublet tonnage finds a home and whether rates continue to slide for these vessels, with damage limitation being the main driver for disponent owners. Significant falls have occurred in the 2500-2800 sizes; somewhat inevitable considering the slot cost had become so relatively expensive compared with the larger sizes. Conversely, the 1700teu sector has held relatively steady, with most fixtures at around or only a shade lower than last done and in spite of a build-up of tonnage in the Far East in the 1100teu segment, rates here have also held firm, though it will be interesting to see for how long this will be the case. It is not all doom and gloom, however, with some positive news emerging from the US in particular, most notably US housing starts increasing 10.2% for September versus the same month last year. Also, in addition to well docu-mented growth in Brazil, the IMF predicts 2011 to show 5% growth for sub-Saharan Africa, with the 2012 outlook even higher at 6%.
