VLCC rates could see pre-Chinese New Year spike: ship brokers

Singapore

FREIGHT rates in Asian trades for very large crude carriers (VLCCs), which are close to three-month lows, could rebound this week on tighter tonnage supply and buoyant chartering volumes ahead of the Chinese New Year holiday, ship brokers said.

That came as VLCC freight rates from the Middle East and West Africa to Asia started to level off after dropping to the lowest level since Oct 30 on Thursday, Reuters freight data showed. "(This) week we could see a pre-Chinese New Year spike," said a Singapore-based VLCC ship broker.

That will depend on whether charterers decide to conclude the remainder of February's loading programme ahead of the holiday or feel they can wait until after the Chinese New Year break, which starts on Feb 7, the broker said.

Around 10-15 charters remain to be fixed for the middle of February, with around 20-25 for the balance of the month, brokers said. "The market isn't going to roar but there is more chance of rates moving up a couple of points rather than a downside," said a European VLCC broker. "The list of available tonnage is a lot thinner (than the start of this year)," the European broker added.

VLCC rates have halved, from W114 on Jan 4 to just under W58, equivalent to US$45,683 per day, on Thursday, due to an oversupply of tonnage and slower chartering volumes, brokers said.

VLCC rates from the Middle East to Japan will average around W59 in the first quarter, said Andrew Scorer, principal trade analyst at IHS Maritime & Trade in London. "Rates will taper off as new ship deliveries kick in throughout the year, with rates rising again in the last quarter. The overall World-scale figure for 2016 could be around W50," Mr Scorer said. "We could see strategic floating storage contango plays occur in the second half of 2016 if the fundamentals allow as rates are lower than last year," he added.

Freight rates for the Middle East to Japan benchmark route fell to about W57.8 on Thursday, down from close to W74.50 a week earlier and equivalent to a fall in earnings of US$17,400 per day. VLCC rates from West Africa to China dropped to around W64.50 on Thursday, against W74.50 the same day a week earlier.

Rates for an 80,000-dwt Aframax tanker from South-east Asia to East Coast Australia fell under W108.50 on Thursday, the lowest since Nov 23, compared with around W116.75 a week earlier, as too many vessels chased too little cargo, brokers said.

Clean tanker rates from Singapore to Japan were down to W131 on Thursday, from almost W134 the previous week. REUTERS