Freight rates for very large crude carriers (VLCCs) are likely to fall next week as charter activity from China slows ahead of the Chinese New Year holiday, ship brokers said.
Rates on the West Africa-to-Asia route have already started to slide probably because of the Chinese New Year impact, said Ashok Sharma, managing director, BRS Baxi Far East, Singapore.
“I feel the Middle East has plateaued. If next week the market is slow and quiet then the market will take a bit of a correction,” he told Reuters.
Around 30 VLCC cargoes have been fixed for loading from the Middle East in the first 10 days of February, brokers said.
“It is a fairly sound number for a short month,” he added.
Cargo volumes could also slow down in March due to refinery maintenance in April, he told Reuters.
The tonnage list of VLCCs available for charter is “well populated” with ships although the supply of ships than can load prompt cargoes is tight, a European supertanker broker said.
“I would think we will see the market soften over the next couple of weeks,” the European broker added.
That came as shipbrokers Banchero Costa (Bancosta) and E A Gibson highlighted growth in the tanker fleet this year, partly due to the delay in delivery of new ships between 2016 and 2017, that could adversely affect freight rates.
“Fleet growth could be as high as 6.5 percent in 2017 if both slippage (delivery delays) and demolition remain low. This will certainly put negative pressure on rates and values this year and probably next year as well,” the Bancosta report released on Wednesday stated.
The VLCC fleet is forecast to grow 5.4 percent this year and 3.6 percent in 2018, while tankers totaling 25.9 million deadweight tonnage (DWT) are due for delivery this year, Bancosta said.
Delivery of 25 percent of the tankers has been delayed from last year, Gibson said in a report on Monday.
The number of delayed cases were maximum for Suezmax tankers with 13 ships of 40, which were to be delivered, yet to hit the water. Around 25 percent of VLCCs have been delayed, the Gibson report said.
VLCC rates on the Middle East to Japan route rose to around 85.75 on the Worldscale measure on Thursday, from W83.25 last Thursday.
That is equivalent to an increase in rates to $43,232 per day from $42,035 per day last week, freight data on the Reuters Eikon terminal showed.
Rates on the West Africa-to-China route fell to around W82.76 on Thursday from W83.50 last week.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia surged to W133 on Thursday from about W105.50 last week on higher cargo volumes. That was an increase in daily earnings to $17,015 from $10,274.