* “Worst tanker market I’ve seen in five years” -broker
* Without scrapping, downward rate pressure will continue -Euronav CEO
* About 20 MidEast VLCC still to be fixed for August
By Keith Wallis
Aug 11 (Reuters) - Freight rates for very large crude carriers (VLCCs) on Asian routes may have finally bottomed as owners attempt to resist moves by charterers to push rates still lower, brokers said.
“This is a really bad market now. The floor keeps getting lower but I think there’s now resistance by owners,” said a Singapore-based supertanker broker on Friday.
That came as VLCC rates from the Middle East averaged around 42 on the Worldscale measure this week, a new low for this year and lower in equivalent earnings than 2016.
“VLCC owners now only have one quarter left to make it up but even if average global VLCC rates go up to $30,000 a day - which is not impossible with increased winter demand - average rates for the year will probably end under $25,000 a day,” said Ashok Sharma, managing director of ship broker BRS Baxi Far East in Singapore. “Winter demand will be the next trigger to push the market up.”
Average global rates for smaller Suezmax and Aframax tankers have also crashed, with rates for 80,000-deadweight tonne Aframaxes at around $2,000 a day.
“I haven’t seen the tanker market, with its consistent lows, this bad for five years,” Sharma said. “This year is competing with 2013, although I think 2013 was worse than this year.”
Rates from the Middle East have been dragged down by modern tonnage competing with handicapped vessels - older ships and those straight out of dockyards that need immediate employment - for cargoes.
“The oversupply of tonnage remains, which leaves competition among owners fierce for every firm cargo,” said Norwegian ship broker Fearnley in a note on Wednesday.
Around 20 VLCC cargoes for August loading remain to be fixed from the Middle East, brokers said. Around 107 charters have been so far fixed for August.
But charter rates from West Africa have been more resilient at around W50 partly due to charterers’ ship vetting procedures, which only allow cargo to be carried on modern vessels that have made consecutive voyages.
Buoyant cargo demand, especially for sweet crude, has also supported West Africa rates.
Asia’s loadings of West African oil are expected to climb to 2.18 million barrels per day (bpd) in August, the highest in six months, on a revival in China’s appetite, a Reuters survey of traders and shipping data showed on Monday.
“If the illness is low freight rates then the cure is low freight rates as that should drive scrapping activity,” Paddy Rodgers, chief executive of leading tanker owner Euronav said in an interim earnings statement on Thursday.
With 28 VLCCs and 23 Suezmaxes due for delivery in the second half of 2017, without scrapping, the downward pressure on rates will remain, he added.
“The concentration of the delivery of newbuildings is the key driver to current and future freight rates,” Rodgers said.
VLCC rates on the Middle East-to-Japan route dropped to W42.50 on Thursday, compared with W46.25 last week. Rates on the West Africa-to-China route increased slightly to W50 on Thursday from W49 last week. Charter rates for an 80,000-deadweight tonnes Aframax tanker from Southeast Asia to East Coast Australia fell to W84.75 on Thursday, compared with around W85.50 last week. (Reporting by Keith Wallis; Editing by Biju Dwarakanath)