Multiple spot fixtures of VLCCs have failed because the shipowners and operators did not want to extend their waiting periods for the charterers to confirm, according to market participants.
In spot tanker trade, ships are commonly fixed by charterers subject to management approval and physical cargo stem being confirmed while owners and operators can wait for 48 hours.
But Tankers International data showed seven voyage charters tentatively fixed on Thursday and Friday failed to materialise, of them three were for West Africa-to-China trade and four for shipments from Middle East Gulf to China, US Gulf and the west coast of India.
According to the database, the fixtures of Zodiac Maritime’s 319,800-dwt Red Nova (built 2013) at Worldscale 170, Shell’s 299,300-dwt Bunga Kasturi Enam (built 2008) at WS 197.5 and DHT Holdings’ 298,600-dwt DHT Lake (built 2004) at WS 215 were not concluded after the shipowners and operators refused to extend their waiting time.
Fixtures of Kyklades Maritime’s 319,000-dwt Nissos Donoussa (built 2019) at WS 220, Koch’s 315,200-dwt Almi Atlas (built 2018) at an unknown rate and Aeolos Management’s 319,400 Skopelos (built 2002) at WS 160 failed for unspecified reasons.
Trafigura is understood to have not fixed the 308,100-dwt Landbridge Glory (built 2019) to Bahri at WS 140 due to a delay in discharge schedule.
Also, Clarksons Platou Securities said it observed “a couple of failed fixtures” on Monday as the charterers' requests for extension were denied by the owners.
“Having learned from the mistake of October 2019, owners are now pushing for clearance faster than usual,” the brokerage said.
Spot earnings of VLCCs reached $300,000 per day on the Baltic Exchange last October, but tanker players pointed out many fixtures that emerged at the peak level were eventually cancelled by the charterers.
Market ceiling
While the sentiment among tanker owners remained strong amid rising Middle Eastern crude exports, some analysts suggested further upside could be limited.
On Monday, Seven Islands Shipping’s 299,300-dwt Lavails (built 2000) was reportedly fixed by Indian Oil Corp (IOC) for a voyage charter from Iraq to the west coast of India at WS 340, with a loading date of 5 April.
A broker said this may not reflect the general market level, as the owner would bear the port costs as Basrah per IOC’s practice and the ship is old.
Still, the rate was lower than the Reliance Industries fixture of the 306,200-dwt Princess Mary (built 2004) seen last Friday at WS 400.
With global average VLCC earnings already at $258,200 per day as of Monday morning, up from the month-ago level of $22,500 per day, Clarksons Platou said refineries would not want to pay more for freight.
“We believe capacity utilisation for tankers is now so high that it’s down to refining margins for how high this market could potentially go,” the brokerage said.
“In Europe, we assess the average product price at $32 per barrel for a complex refinery…with the freight cost MEG-Europe at $11.50 per barrel, the overall crude cost of $32 per barrel is more or less exactly the same as the average product yield.”
The brokerage concluded that unless refining margins improve freight rates “probably can’t go higher”.
However, many European countries have announced lockdown measures to control the spread of coronavirus, which is expected to lead to further falls in oil consumption and pressure refining margins.
“This [VLCC market] is all going to fall apart at some stage unless we see a strong demand recovery,” said a London-based analyst.
Zodiac Maritime, Shell, Kyklades, Koch, Aeolos, Seven Islands Shipping and IOC did not immediately respond to emails seeking comment.
