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Table of Contents
Is EV Uptake Slowing?
In recent months we have seen some gloomy developments in the electric vehicles (EV) market. Rental company Hertz has already announced its plans to sell 20,000 EVs and now plans to offload another 10,000 due to waning demand. Tesla has abruptly dismissed the team running its electric vehicle charging business, raising doubts about the future of one of the largest US charging networks, especially considering that a lack of charging infrastructure is one of the main barriers to widespread EV adoption. Elsewhere, Mercedes-Benz has announced in recent investor conference a delay to its EV sales target, now aiming for EVs and hybrids to account for up to 50% of its sales by 2030, instead of initial target of 50% by 2025.
Recent statistical data for the US and Europe provide further evidence of a cooling market. According to Cox Automotive, EV sales in the US rose 2.6% in Q1 2024 compared to Q1 2023, but fell 15.2% relative to Q4 2023, showing the 1st quarter-on-quarter decline since Q2 2020. A factor here is a new guidance for the tax credits in 2024, which means that the number of eligible models has fallen to less than 30 from about 45, although leased cars can qualify for a less strict commercial vehicle tax credit. In the EU, battery-electric car registrations declined by 11.3% in March, largely due to a sharp decline in EV sales in Germany, with the government phasing out all EV subsidies in December last year.
Nonetheless, the IEA remains positive on future growth of the EV fleet, having recently published its annual global EV outlook. According to the agency, during Q1 2024, global EV sales increased by around 25% compared to Q1 2023, showing similar levels of growth compared to the previous year. In 2023, nearly 14 million of electric vehicles were sold, up by 35% YoY, accounting for 18% of all cars sold globally. However, these sales are heavily concentrated in China, Europe and the US. China undoubtedly is a global leader, accounting for 60% of all sales in 2023; that’s compared to 25% in Europe and 10% in the US.
The IEA projects that the EV uptake is set to accelerate, based on today’s energy, climate and industrial policy settings. As per the Stated Policies scenario, almost one in three cars in China will be electric by 2030 and almost one in five in both the United States and European Union. Globally, projected EV uptake will avoid 6 mbd of oil demand in 2030 and over 10 mbd in 2035. Supporting its projections for strong growth in EV uptake, the agency notes that there has been strong investment in EV supply chains and that manufacturing capacity is likely to be capable of keeping pace with future demand. At the same time, EVs are becoming more affordable as competition intensifies, particularly in China. China’s EV exports grew by 80% last year, becoming very popular in developing and emerging economies. There is also growing second-hand market for EVs, with prices of second-hand electric cars falling quickly and becoming competitive with internal combustion engine vehicles.
Yet, the agency notes that challenges remain. The IEA warns that the roll out of public charging needs to keep pace with EV sales. More importantly, outside China, EVs need to become more affordable to support strong growth rates. In Europe and in the US, EVs are still 10% to 50% more expensive than combustion engine equivalents, whilst large EV models still remain unaffordable to average consumers in developing economies.
Quarterly Electric Car Sales (mln)
Crude Oil
Middle East
VLCC Owners are enjoying a busy end to the week as activity remains high for Eastbound voyages. This activity needs to be sustained if we are to see real gains but the fundamentals are looking positive. Today we are calling 270,000 mt AG/China at ws 66.5 and 280,000 mt AG/USG is now at ws 42.
Suezmaxes have been steady with rates for TD23 hovering around 140,000mt x ws 62.5 via Cape. To head East the market is around ws 110, but charterers looking for shorter runs have faced a lack of interest, pushing up rates.
Despite holidays this week, the Middle East Aframax market continues to firm with a tight front end causing some discomfort for Charterers. Suezmaxes have came to the rescue on occasion but Owners sit very comfortably with AG/East at ws 180. Owners remain cautious of Gulf of Aden after further attacks took place throughout the week but with that said, runs between AG and Red Sea remain steady.
West Africa
WAF VLCC activity has been muted in comparison with other areas but we are seeing more questions asked for the last decade and Owners sentiment remains firm with tonnage beginning to thin due to high fixing levels, especially in other parts of the Atlantic. Charterers are preferring to move quietly to cover stems rather than quote the open market and today the rate for WAF/China should be around the ws 66 level. Suezmaxes have stalled with more local ships now available from Dangote offering competitive rates. TD20 today we estimate at 130,000mt x ws 102.5.
Mediterranean
It was a disrupted week for most markets due to Labour Day and Orthodox Easter, and this was no different for the Med Aframaxes. Charterers had realised that if their next cargo was not urgent, it would be better to wait until next week. As a result, there was a gradual decline in freight rates due to the limited early activity. Ceyhan cargoes saw a decrease from ws 180 to ws 165, and there are expectations that this is still not the floor. Several units are expected to come near their open dates by Tuesday when London returns.
TD6 remains steady, with rates for CPC/Med hovering at around 135,000mt x ws 112.5. Rates to head East are still similar to last week, for the few runs that are still being done around $5.3m for Libya/Ningbo via Cape.
US Gulf/Latin America
It’s been a positive week for VLCCs in the USG as rates have began to climb daily as available tonnage supply tightens for earlier stems even going in June. The Brazil export sector has also been active which is helping rates consolidate in an upward trajectory and therefore today, we expect a USG/China run to fix in the region of $9.1m while Brazil/China is paying around ws 65.
North Sea
Stable trading in the North Sea has kept the Aframax market ticking over with limited rate fluctuation. The list holds plenty who will choose the ballast to the States instead of hanging around so the local market will remain firm. Cross North Sea is currently trading at ws 145 levels.
Crude Tanker Spot Rates (WS)
Clean Products
East
The LR1s have seen the lion’s share of the action this week. Although still down on the cargo count, the list closes the week looking very tight at the front end. The TC5s that were done at ws 225 look like they would be very hard to repeat come next week (assessed based a sub 15 years and last nap ship). UKC really hasn’t seen much action and is in need of a fresh test at $4.9/5.0m levels for now.
The LR2s have seen a negative correction, with TC1 dipping to 75 x ws 205 and UKC at $6.05m ex. Kuwait. The Red Sea stems have seen a huge correction, with $3.0m on subs for Yanbu/UKC, a rate which should be repeatable. But that said, the list is pretty tight at the front end and similar to the LR1s, the cargo count is down. Owners hope that next week will bring the stems to the market.
Middle East MRs started the week with the inevitable drop in levels expected off the back of a slow down in cargo flow towards the end of last week. Some 40 points were taken off last done, knocking TC17 down to ws 360, Westbound assessments down to $3.5m and East rates declining in line with similar earnings. However, additional off market activity saw the top of the list thin and we close the week with sentiment firmly on Owners side and a stand off where TC17 at ws 365 has been repeated and mid-month stems are seeing some resistance to last done.
North Asia continued to trade up with decent fresh cargo enquiries, even on the back of public holiday. Benchmark Korea/Australia rate went up 20 points to ws 320 and Korea/Singapore up $55k to $995k. New China export quota is said to be issued next week but we are not sure how much of that factor has been priced in this week. As Charterer fixed forward, the market went into a strange structure again, with very few cargoes left in the next two weeks. In the Straits, regional cargo was still in shortage and as AG failed to maintain its momentum, TC7 only traded up 5 points to ws 300 but the position looks better for the Owners next week.
Mediterranean
Not the most enthralling week for the Mediterranean Handy market with rates bumbling along around the 30 x ws 240-245 mark. Enquiry levels have had the pick from a well stocked tonnage list and for now anyway we continue to hold the line here. With holidays for many, we probably won’t see a true test of this market again till mid next week.
Similarly to the Handies, the MR sector isn’t seeing much excitement either, with the limited stems quoted pairing nicely with the limited tonnage on offer and rates sitting around 37 x ws 195 for TA and +20 or so for WAF. Despite the limited excitement, it is worth noting that we do find ourselves with very limited naturally placed vessels in the region with a lack of ballasters from both the States and WAF. As such, it wouldn’t take much (especially with some jet/naphtha requirements) for this market to tighten very quickly.
UK Continent
For most of the week we saw a fairly stable market for the MRs plying their trade in the UKC with rates bouncing around 37 x ws 165-170. Charterers seemed to have played the game well and come midweek the market felt limited activity warranted a 5 point slip as we saw 37 x 165 the new call for TC2. But a few quiet deals partnered with some iffy itineraries still in ARA, as well as the USG attracting the majority of the USAC ballasters, come Friday a few opportunities have been presented to Owners. This sees TC2 pick up a touch to 37 x ws 180 with Charterers reaching out a little further than usual with a bank holiday on Monday. Whether this momentum can continue into the truncated week ahead is yet to be seen, but it’s certainly a positive end to the week for the Owning fraternity.
It was a fairly active start to the week for Handies in the North as we saw a good amount of fixing for XUKC and also for Russian Baltic liftings. Supply has been limited which did see UKC/Med firm to 30 x ws 205 and XUKC to 30 x ws 215. The MRs over recent weeks have been the thorn in Handy Owners side as they have competed on short haul stems but with TC2 firming today, Handy owners will be hopeful for a rate push after the long bank holiday weekend. Potential here.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
This week has seen Labor Day and Orthodox Easter holidays cause a slowdown in activity across both regions. In the North, levels have held steady at ws 240 despite an ever-tighter list. Most of the activity is being carried out off-market, but enquiry remains at healthy levels which has helped to keep the tonnage build-up at bay. If prompt coverage is needed, we could see owners look to push current levels.
In the Med, the week started with reasonable levels of activity which was to be expected, however as the week progressed, activity suffered and began to slump. The list continued to tighten with units being clipped away faster than they could be replenished, with ws 175 reported on subs in the Med, Owners will be hoping for a fast start to the week ahead to capitalise.
MR
Full stem cargoes have been elusive in the North, however Owners have kept the list ticking over where part cargo employment has been on offer. Looking ahead, Charterers do have to be cautious that MR tonnage remains patchy on the lists where should the need arise, forward planning becomes more essential. In the Med, MR Owners have seen the wind taken out of their sails basis full stem, as a couple of vessels were reported to have failed their subs however, Owners have continued to find employment via part cargoes, helping to keep the list tight.
Panamax
A quiet week for Panamax’s on the Cont as units are thin on the ground giving charterers few options for tonnage should enquiry surface. Sentiment is flat and in need of a fresh test to determine current market levels. In the Caribs/USG, the surrounding Afra markets should help to support levels even though liquidity suffers on these shores.
Dirty Product Tanker Spot Rates (WS)
Rates & Bunkers
Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)
| wk on wk change | May 2nd | Apr 25th | Last Month* | FFA Q2 | |
| TD3C VLCC AG-China WS | +6 | 66 | 59 | 65 | 64 |
| TD3C VLCC AG-China TCE $/day | +9,000 | 45,000 | 36,000 | 43,250 | 36,750 |
| TD20 Suezmax WAF-UKC WS | -2 | 101 | 103 | 106 | 108 |
| TD20 Suezmax WAF-UKC TCE $/day | +250 | 38,500 | 38,250 | 39,750 | 38,250 |
| TD25 Aframax USG-UKC WS | +1 | 181 | 180 | 176 | 193 |
| TD25 Aframax USG-UKC TCE $/day | +1,500 | 45,250 | 43,750 | 41,750 | 45,750 |
| TC1 LR2 AG-Japan WS | -5 | 203 | 208 | 194 | |
| TC1 LR2 AG-Japan TCE $/day | -1,000 | 52,250 | 53,250 | 48,250 | |
| TC18 MR USG-Brazil WS | +6 | 224 | 218 | 295 | 231 |
| TC18 MR USG-Brazil TCE $/day | +1,750 | 29,000 | 27,250 | 41,250 | 27,250 |
| TC5 LR1 AG-Japan WS | -14 | 224 | 238 | 233 | 222 |
| TC5 LR1 AG-Japan TCE $/day | -3,250 | 40,750 | 44,000 | 42,500 | 37,750 |
| TC7 MR Singapore-EC Aus WS | +9 | 294 | 285 | 293 | 273 |
| TC7 MR Singapore-EC Aus TCE $/day | +2,000 | 37,500 | 35,500 | 37,000 | 30,500 |
(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis
Bunker Prices ($/tonne)
| wk on wk change | May 2nd | Apr 25th | Last Month* | |
| Rotterdam VLSFO | -40 | 560 | 600 | 608 |
| Fujairah VLSFO | -16 | 625 | 641 | 644 |
| Singapore VLSFO | -21 | 621 | 642 | 644 |
| Rotterdam LSMGO | -23 | 721 | 744 | 801 |
