Wednesday, February 1, 2023
spot_img
HomeHeadlinesAmericas east-facing VLCC freight climbs 39%

Subscribe

To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

Americas east-facing VLCC freight climbs 39%

VLCC freight rates for hauling crude from the US Gulf Coast to China have hit a two-year high at lump sum $10 million, attributable to burgeoning oil demand, a tightened position list and changing trade flows that began with the Russia-Ukraine war.

Platts assessed the benchmark VLCC freight rate for the US Gulf Coast to China route, transporting 270,000 mt of crude, at lump sum $10 million on Sept. 14, up $2.8 million, or 39%, from Aug. 10, data by S&P Global Commodity Insights showed. Platts is part of S&P Global.

Platts last assessed rates higher for the USGC to China route at $11.5 million on April 30, 2020, at the tail end of the floating storage boom, when about 5% of the global tanker fleet was taken out of the freight trade as charterers capitalized on a deep crude contango market. Freight for VLCCs has since been in a slump as the market has faced oversupply issues amid crude demand destruction from the coronavirus pandemic, as well as OPEC+ production cuts.

“”Big numbers getting paid on VLCCs right now,” said one shipowner.

Russian-Ukraine War alters flows

Another factor leading to the increases in freight to Asia from the US Gulf Coast has been the altered trade flows following the Russia-Ukraine war, which began in February. The need to rebalance tonnage supply globally was seen following Europe’s efforts to replace Russian crude with crude from the USGC. Crude exports from the USGC to Europe hit sky high numbers of 8.248 million mt, which when converted based on an API of 7.71, would be 2.05 million b/d in the month of August alone, according to Platts cFlow ship and commodity tracking software from S&P Global. Certain buyers in Asia, like China and India, have increased their purchases of discounted Russian barrels.

US Census data shows that crude exports on the USGC-Transatlantic route amounted to 1.59 million b/d in the second quarter, compared with 1.1 million b/d during Q2 2021, with Europe taking an average of 47% of all US crude exports during Q2 2022. The data shows that US crude exports to Europe ramped up 1.7 million b/d in July, when exports to Asia amounted to 1.5 million b/d.

Crude exported from the US Gulf Coast has seen its share of exports to Asia hit 41% in July, coming up from a 33% low in April, a number which hasn’t been seen since the height of the US-China trade war in 2019. The fixture count for VLCCs making USGC to Asia runs in July 2022 clocked in at 13, while numbers spiked to 24 in August 2022, a 46% increase. The number of VLCCs making the same run in July 2021 was six, while only one was reported in August 2021.

Ton mile demand is returning as we see more ships make long haul runs vs. trans-Atlantic so far in September. There have been 15 VLCC ships placed on subjects this month out of the US Gulf to Asia, while only four VLCCs have been booked to Europe, according to Platts fixture data.

Tonnage supply tightens

As more ships were looking to fix October dates for Eastern-heading voyages, alongside the market already accomplishing firm rates, the position list continued to shrink, giving owners the upper hand in negotiations to keep pushing rates up firmer.

“The list is pretty tight,” said one shipbroker. “The AG market has been busier and VLCC markets tend to all move together.”

Increased US and Brazilian volumes heading East also had a hand in the upward trend encompassing other global regions by attracting more tonnage in the Atlantic. The Persian Gulf and West African markets have been very active in particular, only exacerbating the slimming position lists, according to shipping market sources.

“Activity across the board will continue to stretch the tonnage,” said another shipbroker.

A lack of available ships for charterers looking to fix for earlier in the month dates, as well as the favorable rates for shipowners out of the US Gulf, had the number of ballasters in the USGC up to Oct. 13 hitting 20 ships.

An uptick in the number of crude cargoes heading to other Asian countries, especially Japan and South Korea, has also contributed to firming freight levels as demand is rebounding. China’s zero-tolerance approach to COVID-19 and the subsequent city lockdowns puts their economy in a precarious situation. Although other Asian countries show healthy demand, Chinese demand teeters. According to S&P Global analysts, further gains are expected as we move towards the seasonally higher fourth quarter.

Source: Platts

Related Posts

Video

Finance & Economy
Shipping News
Ports

Wartsila: A challenging year with strong annual growth

HIGHLIGHTS FROM OCTOBER–DECEMBER 2022 Order intake decreased by 24% to EUR 1,638 million (2,150)Service order intake increased by 6% to EUR 791 million (747)Net sales...

Hapag-Lloyd achieves extraordinarily strong result in its anniversary year 2022

On the basis of preliminary and unaudited figures, Hapag-Lloyd has concluded the 2022 financial year – in which it celebrated its 175th anniversary –...

Bahri sees profits soar in 2022

Saudi Arabia’s Bahri has seen its profits soar by over 400% in 2022 following a boom in tanker rates, boosting the shipping giant’s oil...

Euronav Files Second Arbitration Against Frontline

Euronav NV hereby informs its shareholders that on 28 January 2023 it has filed an application request for arbitration on the merits in relation...

Oaktree looking at block sale of existing shares in Hafnia Limited

OCM Luxembourg Chemical Tankers S.à r.l. which is ultimately controlled by funds managed by Oaktree Capital Management L.P. (the "Seller") has retained Fearnley Securities,...

Baltic index logs worst month in 3 years

The Baltic Exchange’s main sea freight index registered its biggest monthly percentage fall in...

Baltic index snaps 9-day losing streak as panamax, supramax rates rise

The Baltic Exchange’s main sea freight index snapped its nine-session losing streak on Tuesday,...

Cyprus shipping making waves – report

Cyprus shipping, the steady driver of the economy, is sailing for better times, having...

Baltic index hits fresh multi-year lows on capesize dip

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk...

Baltic index falls for seventh session on lower capesize demand

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk...

Port of Long Beach Closes 2022 with Second-Busiest Year

The Port of Long Beach marked its second-busiest year on record by moving 9.13 million twenty-foot equivalent units in 2022, allowing for a return...

Hapag-Lloyd AG acquires share in J M Baxi Ports & Logistics Limited

Hapag-Lloyd AG signed a binding agreement today under which it will acquire 35% of J M Baxi Ports & Logistics Limited (JMBPL) from a...

Nigeria opens ‘game changer’ billion-dollar deep seaport

Nigeria opened a billion-dollar Chinese-built deep seaport in Lagos on Monday, which is expected to ease congestion at the country’s ports and help it...

SC Ports handles nearly 3 million TEUs in record 2022

South Carolina Ports had a record 2022 with the most containers ever handled at the Port of Charleston. SC Ports moved nearly 2.8 million TEUs...

January oil loadings from Russia’s Baltic ports set to jump 50% vs Dec

Urals and KEBCO crude oil loadings from Russia’s Baltic ports of Primorsk and Ust-Luga in January are set to rise by 50% from December...