Spot time charter equivalent earnings of VLCCs are stabilising at about $100,000 per day, pointing to big profits for shipowners this winter despite incremental fuels costs for many vessels due to IMO 2020.
Preliminary fixture date showed Unipec earlier this week chartered the 320,800-dwt,scrubber-fitted Anbar (built 2019) at Worldscale 117. And the Chinese company, the world's largest charterer of large tankers, took the 300,000-dwt, non-scrubber Baghdad (built 2016) at the same rate.
Unipec fixed both ships, operated by Al-Iraqia Shipping Services & Oil Trading, to load crude from the Middle East Gulf in mid-December for voyages to China.
Similar deals had been done at about WS115 last Friday.
“The market level is [between] WS 117 and WS 118, pending on how prompt the cargo is,” said a tanker owner.
Scrubber-fitted and non-scrubber vessels are expected to continue to achieve similar rates in spot tanker trade, where deals are generally done on a lumpsum or Worldsacle basis inclusive of bunker costs.
But their underlying TCE earnings are beginning to diverge, according to brokers.
In the spot market, most VLCCs are fixed to load from Middle East or the Atlantic basin next month for voyages to Asia, and their trips will be completed in January or later.
Based on the IMO 2020 rules, nearly all of the trading fleet will need to switch to the more expensive 0.5%-sulphur fuel from high-sulphur fuel (HSFO) from January unless they are installed with the exhaust gas scrubbers.
As of Wednesday, Clarksons Platou Securities assessed the global average spot earnings of VLCCs consuming HSFO at $104,500 per day, up from $100,000 per day at the beginning of the week. Spot earnings for VLCCs consuming low-sulphur fuel rose to $90,700 per day from $87,000.
Both readings are “very good” daily returns, according to the owner. “The market is very tight.”
Industry participants have widely predicted that VLCC earnings will remain high in the coming weeks, mainly due to seasonal oil demand and a large number of ships taken out of the market for scrubber installation.
Based on Fearnley Securities’ forecast, VLCC earnings will average $68,000 per day in the fourth quarter of 2019 and $51,000 per day in the first quarter of 2020.
Jefferies analyst Randy Giveans pointed out many bullish factors are at play simultaneously, resulting the buoyant mood for shipowners.
“The underlying supply picture is the best it has been since 2003, and multiple demand drivers, including increased tonne-mile demand from IMO 2020, remain in place for 2020,” Giveans said.
“We continue to believe that rising refinery throughput, crude slate switching, increasing long-haul voyages from the US, North Sea and West Africa…and all other vessels undergoing fuel tank cleaning in the coming weeks will boost tanker rates in the fourth quarter of 2019 and into 2020.”
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