Rebound in Tanker Freight Rates Echoed in Ships’ Values As Well

As expected tanker values have started to pick up of late, following the trend set in the freight market. In its latest weekly report, shipbroker Intermodal wondered whether the rise in crude carrier rates is driven only by seasonality, or is the recent positive reversal signaling the end of challenging days for the market? Intermodal says that “whatever the case may be, it seems that at least for now soft sentiments belongs to the past, with both the spot and period market steadily firming. Given the improvement in sentiment, it is normal that appetite in the SnP would also increase, while besides interest from specific ship-owners that were looking to invest for a while now, there is also interest from new Buyers who are encouraged by the performance of the freight market”.

According to Mr. Giannis Andritsopoulos, SnP Broker with Intermodal, , “focusing on the past couple of weeks, there are rumours that a K-Line Aframax, namely the ‘SINGAPORE RIVER’ (115,126dwt-blt ‘09, Japan) with SS/DD due in March 2019, was committed at $23.5 million, whereas, in June during Posidonia, Bergshav purchased a sister vessel from the same sellers, namely the ‘SENTOSA RIVER’ (115,146dwt-blt ‘08, Japan), for a price in the region of $19.0 million, which translates to an impressive increase of around 17% in less than six months (including yearly depreciation for the age difference). Another noticeable sale is that of the ‘TOLEDO SPIRIT’ (159,342dwt-blt ‘05, S. Korea), where almost ten Greek Buyers inspected the vessel and competed aggressively, with the vessel eventually changing hands for $19.0 million”.

Intermodal’s broker added that “on the MR side the improvement is also evident. In the beginning of October the Doun Kisen vessel, namely the ‘HIGH ENTERPRISE’ (45,967dwt-blt ‘09, Japan), was sold to Greek owners, Spring Marine, for a price in the region of $13.95 million. A month after this deal, the same owner sold the ‘SILVER EXPRESS’ (47,401dwt-blt ‘09, Japan), for a price in the region of $15.3 million, while during the past week the ‘HIGH PEARL’ (48,023dwt-blt ‘09, Japan), was reported sold for a price of $16.0 million”.

Andritsopoulos concluded by noting that “we expect SnP interest in the sector to remain firm at least for as long as earnings remain around the healthy levels of late and given that there will be no wild volatility in the freight market during this winter we should also see additional premiums on future deals, especially in high quality tonnage of up to ten years of age”.

Meanwhile, in the VLCC tanker market this week, shipbroker Charles R. Weber said that “rates rose to fresh year-to-date highs early during the week on a tight prevailing supply/demand positioning following last week’s surge in demand. A slowing thereof, however, saw rates retreat at the close of the week amid waning sentiment. This came even as fundamentals actually tightened, thus raising the prospect of a rebound during the upcoming week. A total of 30 fixtures were reported in the Middle East market, marking a 25% w/w decline. Meanwhile, the West Africa market observed just a third of last week’s tally with just three units reported fixed. The Atlantic Americas yielded just two fixtures, or half last week’s tally. Fundamental strengthened irrespectively, as evidenced by a successive narrowing of surplus supply in the Middle East market as the December program progresses. Whereas November concluded with 14 surplus units, the surplus slipped to nine in December’s first decade and to six in the month’s second decade; we project that it will slip further still during the third decade, to just five units, or a fresh low in the current cycle. A rebound in activity during the upcoming week could help to hasten rate gains that reflect the tighter fundamentals”.

CR Weber added that “reports this week indicating that Unipec plans to resume imports of US crude raise the specter of a rise in demand in the Atlantic Americas to cover corresponding cargoes. A negotiating period ending on March 1 implies that cargoes will need to be fixed and imported in the interim. Given normal forward fixing and a voyage duration of nearly two months, limited time remains to cover any fresh cargoes to be imported by China by March, suggesting a potential imminent rise in associated fixture demand. Meanwhile, the OPEC+ agreement announced Friday calls for production cuts of 1.2 Mb/d from an October base to be distributed two‐thirds to OPEC producers and the balance to a non‐OPEC group led by Russia. Given that production surged during November from October, the implications may be less pronounced than some participants had feared. Iran, Venezuela and Libya are exempted from cuts, though the former two are expected to observe independent output declines amid US sanctions on Iran over its nuclear program and worsening mismanagement of energy resources by the Venezuelan regime. Saudi Arabia appears to be shouldering an outsized portion of the OPEC cuts having indicated January production of 10.2 Mnb/d which represent a 4.7% reduction from October production of 10.7 Mnb/d. November production stood at 11.1 Mnb/d. Absent greater granularity about how the remainder of the cuts will be distributed, we note that the development may prove positive for the VLCC market by pushing Asian crude buyers further afield to the Atlantic basin. Indeed, US crude production continues to rise with a y/y gain of 1.16 Mnb/d projected by the EIA during 2019 (other sources expect gains of as much as 2.0 Mnb/d)”, CR Weber concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide