VLCC rates are dipping from their 2024 highs but will maintain their strength amid robust global demand for tonnage, according to freight analyst Kpler.
Spot rates for the largest crude carriers dipped on Tuesday following a strong month that saw earnings hit their highest peaks since March last year, Baltic Exchange data showed.
Time charter equivalent rates for VLCCs have outstripped those for smaller suezmaxes and aframaxes for more than a week — the first time that has happened since December 2020.
VLCCs topped $65,000 a day on Monday before falling back to $61,152 on Tuesday, according to Baltic data.
“After the sudden surge in rates, charterers are actively working to normalise rates, according to brokers,” analysts at Clarksons Securities said.
“With plenty of offers coming in on certain cargoes, charterers are in no rush to fix and expect rates to decline further.”
The surge in rates during last week followed an increase in fixtures from the Middle East to China after two months of below-average activity, said Kpler senior freight analyst Matthew Wright.
Kpler said rates from the Middle East to China were up 60% since the start of the month.
The rise was accentuated by a lack of tonnage in the region, with the expected boost in additional supply this year expected to come from the US, Guyana and Brazil.
“Further increases will require sustained fixture activity, which appears to be cooling,” said Wright.
Maintain the gain
“While rates will decline slightly from current levels, the combined increase in demand from all key load regions will help maintain the gains made this month.”
The Middle East accounts for two-thirds of all VLCC exports but tonne-mile increases in recent times have been driven by US to Asia voyages, particularly after Opec production cuts led by Saudi Arabia.
But fixtures from the Middle East to eastern Asia have increased from 15 in January to 42 this month already, with more VLCCs also heading to Europe, said Wright.
VLCC fixtures from Brazil and West Africa are also higher this month.
They include Euronav’s 299,421-dwt Antigone (built 2015) fixed on Tuesday on subjects at $115,000 a day with charterer Petrobras for 46 days on the Brazil to China run, according to Tankers International data.
“The combined increase in demand from the Atlantic and Middle East will help maintain the gain in rates, however, it’s likely rates will retrace slightly first,” said Wright.
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