Unlike the usual seasonal pattern, in December dirty tanker spot freight rates in general did not show any remarkable gains. Average dirty tanker spot freight rates were almost stable from a month before to stand at WS78 points, pressured by a decline of WS10 points in average spot VLCC freight rates during the month on the back of high vessel availability while tonnage demand remained limited, thus unable to support any growth in rates during the month. The increase in vessel capacity during 2017 weighed heavily on tanker market profitability as a clear sign of the current imbalance in fundamentals. Moreover, a reduction in transit delays – mainly in the Turkish straits – was another factor that led to a lack of support for spot freight rates in December. Suezmax and Aframax spot freight rates showed minor gains, with the market also affected negatively by ample vessel supply as seen in the larger vessel markets. Clean tanker spot freight rates strengthened in west of Suez as a result of more balanced conditions, as vessel availability was tighter, which led to a significant gain for medium-range tankers, mainly in the Mediterranean.
Global fixtures went up by 22% in December, compared with the previous month. OPEC spot fixtures rose by 1.62 mb/d, or 15%, averaging 12.8 mb/d, according to preliminary data. An increase in fixtures was registered in all regions, up by between 10% and 22% from the previous month. Compared with the same period a year earlier, all fixtures were higher with an only exception on the Middle East-to-East route.
Sailings and arrivals
Preliminary data showed that OPEC sailings rose by 0.5% in December, averaging 24.10 mb/d, remaining 0.6 mb/d, or 0.2%, higher than in the same month a year earlier. Arrivals in North America, Europe and Far East were up from the previous month, while West Asian arrivals declined by 0.32 mb/d, to average 4.55 mb/d
In December, VLCC spot freight rates diverged from the usual pattern during the peak winter season, with average monthly VLCC spot freight rates dropping to the lowest level in 4Q17. The VLCC market was mostly flat over the month, as it did not benefit from the usual rising seasonal trend as vessel demand remained weak and earnings remained low on most routes. Furthermore, rates were under pressure on all selected routes as vessel supply remained ample. Freight rates continued declining despite some improvement in tonnage demand in the week ahead of the holidays, as the number of inquiries remained scarce in comparison to a high number of idle ships. Lack of delays and slow movement in the market also contributed to the fall in rates.
The imbalance in the market came mostly as a result of continuation of newly built deliveries to the market seen during the year. The drop in freight rates was registered on many routes as high vessel availability existed on all major trading routes. The highest monthly decline in freight earnings for tankers was seen on the Middle East-to-East route, dropping by WS15 points from a month earlier followed by rates registered on the West Africa-to-East route, where earnings declined by WS12 points to stand at WS57 points. Levels for West Africa were weak as the market suffered from general weak tonnage demand. Tankers operating on the Middle East-to-West route saw a drop in spot freight rates, down by WS3 points from the previous month, to stand at WS25 points. VLCC freight rates in December showed a drop on a monthly and annual basis on all selected routes, with no exceptions.
Suezmax spot freight rates showed some increases in December, though remaining below the levels seen in the same month a year before. Average Suezmax rates increased by WS6 points compared with the previous month. The gains in Suezmax rates were halted by charterers continuing to attempt to control the market and preventing rates from increasing despite an occasional increase in activity in West Africa, the Black Sea as well as some other areas. On the other hand, limited delays at the Turkish straits also prevented rates from registering remarkable gains at any stage of the month. Therefore, vessels operating on the West Africa-toUS route rose by WS8 points, to average WS87 points, while rates for Northwest Europe-to-US routes increased by WS4 points to average WS66 points. In December, Suezmax tonnage supply was sufficient despite an occasional thinning in vessel availability.
Aframax average spot freight rates went up by WS8 points in December. The gains were driven by higher freight rates seen by tankers operating on the Caribbean-to-US route, where they averaged WS160 points showing a remarkable increase of WS43 points from the previous month, and a rise of WS23 points from the same month a year earlier. Firm sentiment in the Caribbean lasted for some weeks in December before rates started to gradually decline, as tonnage availability started to build up. On the other hand, Aframax rates on all other reported routes dropped from a month earlier. Vessel availability in the spot market was ample and many markets were lacking activity. Spot freight rates for the Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes declined by WS2 and WS3 points, respectively, to stand at WS100 points and WS96 points, respectively. Aframax freight rates in the East were no exception. They dropped on the Indonesia-to-East route by WS9 points to average WS101 points.
Source: Hellenic Shipping News.