A spike in demand for modern VLCC units had boosted owners’ sentiment with rates on the key Persian Gulf to China route breaching the 50 Worldscale mark Wednesday for first time in four months.
After languishing for a good part of the year, the rates were starting to pick up largely to compensate the owners on the bunker price hike. The freight levels had gone above the w50 mark with offers being talked in the low to mid-w50s range.
The VLCC market saw w50 being repeated twice Wednesday on the Persian Gulf to China route. This was the first time rates had reached the w50 level since January this year.
Chinese charterer Unipec was widely reported to have placed the Maran Ariadne and the Tai Hung San on subjects for PG-China voyages, loading over mid-June, at w50 basis 270,000 mt, shipping sources said.
S&P Global Platts assessed the VLCC PG-China voyage at w50.75 basis 270,000 mt Wednesday. The rate was last above this level on January 22, when it was assessed at w50.5 basis 270,000 mt.
Market sources said charterers were snapping up modern and well-approved vessels, which commanded about a w10 premium to compromised vessels, which were older units or lacking certain approvals, according to market fixtures.
“When the rate hit w50, [charterers] jumped in because they were worried it would go higher, so that sustains the market, and it will depend on whether charterers need modern ships or not,” a broker based in north Asia said.
The VLCC market got an upward boost due to the firm bunker prices which had stayed over $400/mt for the past 5 weeks, and bunker prices had climbed by close to 22% since the beginning of March, according to S&P Global Platts data.
“The main fixing window is about mid-June now, owners are very bullish. I think it is just sentiments pushing the market because bunkers had started to drop late last week, and there are still tons tonnages available,” a charterer from a north Asian refiner said. Market sources said the VLCC PG position list still had an excess of just over 30 vessels, however, there were limited modern well-approved vessels.
Market sources also said the bump up in activity could have been due to the short work weeks due to bank holidays.
“The VLCC market has legs to get to w55 before charterers pause their activity when they complete the June second decade cargoes, as the tankers will speed up and tonnage will become balanced,” a Singapore-based VLCC broker said, adding that in the short term rates would not go higher than w55 for a typical VLCC PG-China voyage.