A key indicator of VLCC spot rates fell below $3,000 per day for the first time in more than a year as an active Atlantic market was not enough to compensate for declines in the Middle East.
The Baltic Exchange’s time-charter equivalent rate assessment for the spot market for the large tankers slumped to $2,443 per day on Wednesday, which marks a one-day slump of 31.1% and is roughly half the spot earnings a week earlier.
The figure is also the lowest level seen since early August of last year, and it is well below the $30,800 per day average rate for the last 12 months and a far cry from the peak of $77,600 per day in March.
Other market averages show VLCC rates at significantly less painful levels, with Clarksons Securities’ daily market snapshot showing the fleetwide average earnings at $32,200 per day on Monday, a one-day dip of 1.2% and a slump of 21.2% over the last month.
But the downward trend remains the same.
Data from Clarksons, the London-headquartered shipbroking giant, shows that rates for eco VLCCs, with or without a scrubber, have not been this low since this time last year.
The Middle East Gulf market remains the weakest, a trend that may continue if Saudi Arabia extends its 1m barrel per day production cut into October,” said Clarksons Securities, the broker’s investment banking arm.
“Despite increased activity in the Atlantic region, VLCC rates have been declining.”
On Wednesday, the declining rates in the Middle East were in full view as Kuwait Petroleum Corp grabbed International Seaways’ 298,000-dwt Seaways McKinley (built 2011) for the equivalent of $24,000 per day, according to VLCC pool Tankers International, which operates the vessel.
The rate for the scrubber-fitted vessel equates to $19,800 per day for a round voyage on the benchmark route from the Middle East to China.
The last vessel with an exhaust gas cleaning system, which commands a premium because of lower fuel costs, that was chartered on the same route fetched a higher round-voyage rate of $33,900 per day on 16 August.
Despite higher activity in the Atlantic market, it did not prop up rates in the region.
Petrobras booked the 301,000-dwt Elbhoff (built 2017) for $30,200 per day for a trip from Brazil to China. The Sincere Navigation vessel, which has a scrubber, is also in the Tankers International pool.
The round voyage rate equated to $33,700 per day, which is down from $36,100 per day fetched by a scrubber-fitted Frontline ship a day earlier and from $42,000 per day for a Kyklades Maritime ship on 22 August.
But the slump is not unexpected for this time of year, and a bounceback is expected.
Late August to early September is typically a slow period in the sector’s cycle, as refineries slow down their crude buying ahead of scheduled maintenance in October, the bank said.
“However, there are some encouraging signs for the sector, such as strong refinery margins and an increase in Chinese crude oil prices, which now exceed both the Brent and Dubai benchmarks,” Clarksons Securities told clients.
“As refineries prepare for the end of maintenance and begin to ramp up operations, VLCC rates are expected to rise, following the usual seasonal pattern seen in the autumn months.”
