Abundant charterer inquiry in the Americas Aframax market left sources calling freight for the benchmark US Gulf Coast-UK Continent route higher at w47.5-w52.5 early Dec. 11, after a slew of fixtures set the stage for a long-expected rise in freight for both Upcoast and trans-Atlantic Aframax routes.
The market saw at least 15 Aframaxes booked Dec. 9-11 as charterers rushed to make the most of depressed freight rates after the market plunged back to near-yearly lows in the first half of December amid a build in tonnage over the Thanksgiving holiday.
S&P Global Platts last assessed freight for the 70,000 mt USGC-UKC route at Worldscale 50, up w7.5 on the day, and freight for the East Coast Mexico-USGC route at w52.5, up w2.5 on the day.
“You’re going to see it get hot from here,” a charterer said Dec. 10 following the fixing frenzy. “Next week you’re going to see even more activity than today.”
Phillips 66 booked the Minerva Iris to make a US Gulf Coast-Transatlantic route at w50 after BP booked the Jag Laxmi for the same route at w47.5. Activity is expected to heighten further as the weeks draw near the Christmas and New Year holidays, which typically see artificially high rates amid charterer urgency to cover their cargos ahead of time, sources said.
“There seems to be some steam here before Christmas,” a shipbroker said. “You’re talking about a constraint here, next week people are starting to take off for the holidays, so they want to get everything done before they go.”
The weeks following the Thanksgiving holiday saw a market lull that forced rates back almost 50% from their holiday highs.
Freight for the USGC-UKC route dropped to w42.5, or $8.66/mt, after reaching a high of w80, or $16.30/mt Nov. 3, a level not seen since the first decade of August.
Among causes for the drop in freight during the first decade of December were an unfavorable crude arbitrage into Northwest Europe in November and ample position lists, with a shipbroker’s tonnage list showing Dec. 3 a total of 21 Aframaxes positioned in the USGC within the loading window of Dec. 8-23 and over 10 positions for prompt dates.
According to S&P Global Platts Analytics, the incentive for European crude buyers to import Eagle Ford crude in place of domestic grade Forties crude into Northwest Europe averaged 45 cents/b in November, while the arbitrage for taking WTI MEH crude showed a disincentive averaging minus 40 cents/b. The arbitrage opened in December amid low freight rates, with Platts Analytics calculating the Eagle Ford incentive into Northwest Europe at $2.11/b Dec. 10, and the WTI MEH incentive at $1.47/b.
Adding to market saturation was a charterer inquiry lull sparked by charterers holding off from putting their cargoes out in the market amid fears that freight rates would spike if shipowners sensed rising demand, sources said.
“[Charterers will] probably let the tonnage pile up,” a second shipbroker said.
“Shipowners are very optimistic about the market,” the charterer said. “As soon as they see a few fixtures, they start asking for higher rates. So charterers are trying to hold off.”