Contents
Table of Contents
Still Handy?
Despite being the oldest deep sea tanker fleet, the Handy sector (32,000 – 42,000 dwt) has been the least invested tanker sector of the past decade. Whilst the Handy market has also been most impacted by the War in Ukraine, both from a sale and purchase and trading perspective, there is still a clear need for modern well approved tonnage, with the sector facing a major supply crunch in the years ahead.
From a demand perspective, one cannot hide the fact that demand has declined, with a reduction in Russian cargoes being the key factor. However, clean Handy demand has been stable since 2022, whilst the fleet continues to age. In the dirty market, demand also looks to be steady, with 2024 ytd tonne miles similar to 2023. Evidently for now the decline in demand appears to have paused.
Spot fixture activity has also evolved. Fixture numbers for Handies loading in the Med and NW Europe have grown steadily since 2021, as the need to distribute barrels across Europe has increased following the embargo on Russian oil. This has of course coincided with a drop on spot fixtures from Russia, although part of this drop will be attributable to a lack of transparency in Russian loadings. Nevertheless, it signals an increase in non-Russian trade, at a time where more Handies have been sold into the dark fleet.
From a supply perspective, as of today 74% of the fleet is over 15 years of age, whilst 29% stands over 20 years old. Due to the newbuilding boom prior to the financial crisis, we now see 223 vessels turning 20 years old between 2024 and 2028, with these vessels not being replaced, meaning that by 2028, ~70% of the Handy fleet could be over 20 years old. Today we count just 13 vessels on order, most of which are destined for specific trades. Given that the top charterers for Handies are typically European oil majors and large commodity traders, the ageing of the fleet is problematic. Whilst some vetting policies have had to adjust to market realities, stretching vetting criteria to accept vessels over 20 years of age may be step too far for many charterers.
As such, something needs to change. Either the market needs to move towards MR sized stems with port infrastructure being upgraded where possible, or if the market continues to prefer Handy sized tankers, then newbuilding investment will be required.
Handy Tanker Tonne Miles (CPP/DPP)
Crude Oil
Middle East
VLCC rates have started to nosedive in the AG towards the end of this week as a sluggish 2nd decade has not produced sufficient cargo enquiry to keep levels where they were. There is now a danger of a further drop as Charterers continue to drip feed cargoes into the market and today we are calling a 270,000mt AG/China run at ws 57 and 280,000mt AG/USG is now at the ws 36 level.
The AG Suezmax market has firmed quite dramatically this week with a tight tonnage list for Basrah suitable tonnage. Owners will be aiming to push rates for TD23 to above 140,000mt x ws 90 via the Cape. To head East the market is also firm but is looking to be capped by the VLCCs at around ws 130 for East.
Aframaxes in the AG carried on from where they left off last week with the firm sentiment yet to ease. Understandably, all the noise in the East has come from the ripping Suezmaxes whilst Afras have maintained a steady inching up in rates with AG/East now at 80,000mt x ws 207.5. Home of most of the crude exporting from the AG via Afras has been India with the latest fixture reporting 80,000mt x ws 225. The list does however show signs of replenishment for the end of the 2nd decade with some Owners considering the ballast from Singapore. We expect rates to hold strong for now at least.
West Africa
VLCC Activity has been muted in this region and this is reflected in softening Owner sentiment as Charterers take the upper hand with adjacent markets all experiencing a downturn. It is unlikely to recover in the short term as the market heads to Athens for the Posidonia conference and so we estimate that the current rate for WAF/China should be around the ws 61 level.
Suezmax markets in West Africa remain firm with a tight list for more prompt dates, a healthy numbers of ships have been put on subs to keep rates firm. For TD20 today we estimate this at 130,000mt x ws 117.5.
Mediterranean
TD6 is firm, but there are still ships around that need to fix away, rates are approximately 135,000mt x ws 125. Rates to head East have firmed throughout the course of the week. Rates are around $5.25M for Libya/Ningbo via the Cape.
The Mediterranean Aframax market had a hangover from last week as the inevitable big ease came to pass. What goes up must come down and the rush to fix last week was followed by a rush not to fix. However, the state of the position list with various ports suffering delays did nothing to help rates soften and so the erosion in rates was modest. Ceyhan came off from ws 250 levels down to the mid ws 230s and CPC loaders followed suit. With Posidonia disruption to come and Trieste maintenance ending the smart money is on further correction to come though it will be hard fought for.
US Gulf/Latin America
The tide has turned here in USG for VLCC owners as the steady decline which started last week continued as Charterers continued to chip away at last done levels. The more negative mood was not helped by a large volume of ships failing but a lot will depend on when we see the July programme which should be next week. Brazil exports had a steady week in terms of volume but rates followed the trend in the rest of the market and we expect a USG/China run will fix in the region of $8.8M while we estimate a Brazil/China run is paying around the ws 59 level.
North Sea
The North has slipped back down despite a decent amount of action this week. Rates have retreated with XNsea now trading at ws 147.5-150 levels. With Posidonia starting this weekend we can expect a slow start ahead of us with muted trading on Monday and Tuesday.
Crude Tanker Spot Rates (WS)
Clean Products
East
As the shipping world gears up for a week in Posidonia, Owners appear keen to tuck away ships to have less on their plate as they focus on the upcoming meetings and presentations. We have seen some big negative corrections as Owners take the first counters. Its not as thought this has come as a surprise given that we have seen a lot less quoted into the market this week. But, the drops have been significant! LR2 AG/West is at $6.8M and Naphtha is holding flat at 75,000mt x ws 250. On the LR1s the West is on subs at $4.85M (ex Kuwait) and TC5 just holding at the ws 270 levels but with the correction on West seen, expect this number to be tested. Also expect next week to see a lot of direct off market deals as everyone juggles their time whilst enjoying the delights of the Greek coastline.
On the face of it a disappointing end to the week for MR Owners as EAFR dropped almost 10%, but with earnings still in the low $40k per day level and approximately 10 cargoes still to cover it is unlikely there’s too much groaning going on as the market steadies. With earnings now only a small premium to the Far East it is likely we see less appetite from Singapore ballasters this weekend and with the majority of relets now on subs or doing internal moves, the list looks to once again be in Owner’s favor in the next window.
On the whole it was a busy week for Far Eastern MRs. The 5-10 fixing window has been busy in the North Asia and next window cargos have entered the market too. The benchmark Korea/Spore route went up around $100k to around $950k level. There are no recent last done for Aussie run though. The typhoon season has started, so more disruption should be expected in North Asia over the next 2-3 months. Cargo enquiries in the Staits area continued to be healthy. Although TC7 only gained 5 points to ws 317.5, the short haul rate has improved a lot with cross Straits reached $500-$530k level which was $60-$90k higher than last week. AG sentiment remained strong for the most part but pressure seemed come in at the end of the week.
Mediterranean
It’s been a tale of two halves for the Handys in the Mediterranean this week which saw rates firm to start with but now on the brink of a drop off. We began the week with XMed trading at the 30,000mt x ws 235 mark but with an influx of cargoes on Tuesday the list soon began to tighten and rates jumped 35 points. This was soon followed up with 30,000mt x ws 285 going on subs for a Naphtha stem off prompt dates and since then this has been repeated due to a very tight front-end. However, at the time of writing, little remains outstanding and with the list really opening up past the 5th it is only a matter of time before rates take a tumble. Pressured as we enter the weekend.
Finally to the Med MR market where all in all its been a steady week. Rates jumped up to 37,000mt x ws 235 for Med/TA at the start of the week but since then levels have traded sideways with the help of consistent enquiry and a balanced list. On top of this both the TC14 market has improved which should keep ballast tonnage limited for the next window. Market flat to finish.
UK Continent
It has been a steady week for Handys in the North as levels have traded around the 30,000mt x ws 222.5-225 mark for XUKC throughout. Supply is now on the thin side, but enquiry has slowed and with the weekend on the horizon it will only be beneficial for Charterers as a few more itineraries will firm up. On a positive note, the MR market jumped which now means they will not compete for short haul 30kt clips. Posidonia parties start next week which could see a few private deals getting done under the radar here.
This truncated week started with a bang on Tuesday with a glut of enquiry hitting the shores of this UKC MR sector and clearing out a good amount of tonnage. Charterers managed to keep a lid on Owners enthusiasm for the majority, but momentum did finally get the better and by midweek we saw 37,000mt x ws 207.5 put on subs for TC2. After that though it seems the enquiry tap has been turned off and a slow end to the week sees rates calm a touch to around the 37,000mt x ws 200 mark now. WAF stems have been limited but a recent test sees rates continue to hold a 20/25 point premium. Heading into next week, Owners should still feel comfortable with the States market ripping over the past couple of days, which in turn keeps ballast tonnage away from Europe but expect market information to be hampered by Posidonia parties ahead.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
In the North this week, activity has been sluggish but continues to chip away at the list. As usual, more fixtures have been carried out off-market on hidden ships, keeping true activity as somewhat of a secret. This week also hasn’t seen any real replenishment of tonnage leaving a very tight list as we head into the first decade of June’s Fixing program. Looking ahead, we expect to see a firming of rates continue albeit with a similar gradient of gains seen recently.
The Med has seen its rather quick rise and upcycle reaching what many think is its ceiling with XMed non-premium appearing to have topped out at ws 300. Tonnage has built steadily throughout the week and Charterers will feel as though they can push for lower rates as vessels off a range of dates are now available. This build-up of tonnage can be explained by a slowdown in activity from Tuesday onwards giving replenishment a chance to take hold of the list and bring back relative normality to fixing windows.
MR
MRs in the North have seen barely any action with regards to full stem enquiry. However, for the most part this is perhaps attributable to the fact that MR availability has been patchy at best, proving a real hindrance to liquidity. As far as rates are concerned, sentiment is following the surrounding Handy sector with Owners soon expecting to be able to leverage this into improved TCE earnings. Furthermore, Charterers need to keep an eye on fixing dates, should the need for a full 45kt arise as you may find you need to adjust lead times to allow for ships to arrive from neighboring regions.
In the Med it’s mainly part opportunities for Owners to compete for this week, as full-sized enquiry remains sporadic. Owners with naturally sized units have managed to snap up a few 30kt stems which keeps options fairly limited for Charterers heading into next week, leaving owners feeling they can push levels should prompt enquiry emerge.
Panamax
Panamaxes have seen a quiet week again with fixing and failing being the result of the week. However, workable units remain thin which is likely to correlate to the lack of movement in next done versus current benchmarks despite a somewhat stale last done to work off of. In the USG/Caribs region, tonnage continues to build as idle units stack up, applying negative pressure to rates and giving Charterers multiple options off varied dates which also makes ballasting European units over to the US less of an attractive proposition.
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 30th | May 23rd | Last Month* | FFA Q2 | |
| TD3C VLCC AG-China WS | -10 | 58 | 68 | 66 | 64 |
| TD3C VLCC AG-China TCE $/day | -13,500 | 36,000 | 49,500 | 45,000 | 37,500 |
| TD20 Suezmax WAF-UKC WS | +4 | 115 | 111 | 101 | 110 |
| TD20 Suezmax WAF-UKC TCE $/day | +2,250 | 47,000 | 44,750 | 38,500 | 39,750 |
| TD25 Aframax USG-UKC WS | +33 | 191 | 158 | 181 | 187 |
| TD25 Aframax USG-UKC TCE $/day | +11,750 | 49,000 | 37,250 | 45,250 | 43,500 |
| TC1 LR2 AG-Japan WS | -29 | 241 | 270 | 203 | |
| TC1 LR2 AG-Japan TCE $/day | -10,750 | 66,250 | 77,000 | 52,250 | |
| TC18 MR USG-Brazil WS | +102 | 315 | 213 | 224 | 238 |
| TC18 MR USG-Brazil TCE $/day | +19,750 | 46,750 | 27,000 | 29,000 | 28,750 |
| TC5 LR1 AG-Japan WS | -28 | 265 | 293 | 224 | 233 |
| TC5 LR1 AG-Japan TCE $/day | -7,500 | 52,250 | 59,750 | 40,750 | 41,250 |
| TC7 MR Singapore-EC Aus WS | +5 | 315 | 310 | 294 | 295 |
| TC7 MR Singapore-EC Aus TCE $/day | +750 | 41,750 | 41,000 | 37,500 | 35,000 |
(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis
Bunker Prices ($/tonne)
| wk on wk change | May 30th | May 23rd | Last Month* | |
| Rotterdam VLSFO | +10 | 560 | 550 | 560 |
| Fujairah VLSFO | +6 | 600 | 594 | 625 |
| Singapore VLSFO | +3 | 599 | 596 | 621 |
| Rotterdam LSMGO | -1 | 737 | 738 | 721 |
