West of Suez dirty tanker market sees heavy fall in Suezmax, VLCC rates

The West of Suez dirty tanker market has come under increased downward pressure over the past week, with the West African, Mediterranean and Black Sea Suezmax markets all dropping by Worldscale 10 on Jan. 23.

Market sources attributed the fall to low cargo inquiry levels, at the same time as an influx of vessels ballasting westward away from a softening Persian Gulf market and a decrease in rates for voyages loading in the US Gulf Coast region.

Having seen a rise in rates during the first week of January, the WAF-UK/Continent Suezmax market flatlined at w142.5 over the following two weeks, but is now experiencing increasingly bearish sentiment. Platts, part of S&P Global Commodity Insights, assessed freight for the 130,000 mt WAF-UKC route, exclusive of EU ETS costs, at w122.5 on Jan. 24, a decrease of 10 points on the day and 20 points on the week.

Indeed, some brokers thought that rates could fall even further, amid reports in the afternoon that a vessel had been put on subjects for a 130,000 mt cargo loading in Côte d'Ivoire and discharging in the UK/Continent or Mediterranean, off a Feb. 9-10 laycan, at w120. This represents a w15 drop from the previous WAF-UKC fixture reported, although that was for a Nigeria-loading cargo, which usually incurs a premium of up to w5.

A London-based Suezmax broker put the decrease in rates down to a shift in the tonnage-inquiry fundamentals as well as a downward adjustment in the US Gulf market, which had been the main driving force for the increase in rates earlier in the month.

"Some WAF cargoes from the end of February were deferred to March, and a lot of ballasters from the east have committed to WAF," the broker said. "You've also got an easing USG market and not much action out of the Black Sea."

The WAF VLCC market has also seen weakness in the second half of the month, with Platts assessing freight for the 260,000 mt WAF-East route at w62 on Jan. 23, a drop of w11 since Jan. 11, when the rate stood at w73.

Sources have attributed this softness to a decline in rates for Persian Gulf-East voyages and the westward displacement of tonnage which this has caused, as well as limited cargo inquiry levels in the WAF region.

Declining USG market

The US Gulf Coast market has seen most of the gains it made in early January eradicated over the past week.

"There's just not a lot of activity to keep the market propped up," a shipbroker said.

Platts assessed freight for the 270,000 mt USGC-China route at $9 million on Jan. 23, down $1.25 million from its Jan. 11 high of $10.25 million. Suezmax rates have come down even further, with Platts assessing freight for the 145,000 mt USGC-UKC route at w92.5 on Jan. 23, down w40.5 from its Jan. 10 peak of w133.

"Historically January is normally very weak, so rates have massively bucked the trend -- to see earnings of $60k/d is extraordinary really and expect them to fall further," another shipbroker said. "Massive US exports have kept the market steady, but it couldn't last forever."