The dirty tanker market experienced a generally positive trend in July, with dirty tankers in all classes showing gains on both a monthly and an annual basis. VLCC spot freight rates reported a healthy gain of 19%, while both Suezmax and Aframax rates experienced even higher gains of 26% and 28%, respectively.
Several factors were behind the increase in dirty tanker rates over the previous month, including delays in eastern and western ports combined with prompt replacements, ullage problems and increased lighterage operations. Clean spot freight rates were weak in July, declining on the back of limited arbitrage and low market activity in both East and West of Suez.
Spot fixtures
Preliminary data for July shows that OPEC spot fixtures increased by 5.7% compared with last month to average 12.59 mb/d. Global spot fixtures increased by 5.7% in July compared with the previous month to average 17.94 mb/d. Fixtures on the Middle Eastto-East and the Middle East-to-West routes increased by 0.6 mb/d and 0.10 mb/d in July, respectively. However, OPEC fixtures were down by 12% compared with the same month one year ago. In addition, global chartering activity was reported to be 6.8% lower in July 2014 from the same month one year earlier.
Sailings and arrivals
OPEC sailings, as per preliminary data, reported an increase of 1.4% in July from one month earlier to average 23.55 mb/d. However, compared with the same month one year ago, they were lower by 3.3%. Arrivals in North America, Europe and the Far East were down by 8%, 1.5% and 3.3%, respectively from the previous month, while West Asia arrivals reported an increase of 4.3% from one month ago to average 4.57 mb/d in July.
Spot freight rates
VLCC
VLCC spot freight rates for Middle East-to-East destinations showed the highest increase among all reported routes in July. Spot freight rates for Middle East-to-East lifting increased as tonnage demand was higher in the third decade of the month. The firming trend continued for August loadings, with vessel owners displaying a strong resistance to falling rates, even during quiet periods when the market stabilized. Fixtures for August requirements were supported mainly by lower tonnage availability, which managed to hold them at high prevailing levels.
Thus, VLCC freight rates for tankers operating on Middle East-to-East routes saw an increase of 23% over the previous month to average WS49 points in July, mainly as a result of weather delays in China resulting in slow discharge operations at ports. Rates for eastbound tankers increased despite a decline in South Korean tonnage requirements. Meanwhile, VLCC spot freight rates for Middle East-to-West destinations averaged WS30 points in July, up by 10% from the previous month.
The transatlantic market fluctuated during the course of the month, remaining mostly firm in the Caribbean and exhibiting several gains and losses before stabilizing in West Africa. Tanker spot freight rates for West Africa-to-East routes averaged WS51 points in July — a worthy gain of 20% from one month before.
In addition to monthly gains, VLCC spot freight rates on all selected routes showed an increase over the previous year, rising on average by 18%. VLCCs were sometimes considered a viable alternative, when Suezmax rates firmed at certain times during the month.
Suezmax
Suezmax spot freight rates exhibited a healthy increase in July from the previous month, despite experiencing a slow start with soft rates — mainly in West Africa — before stabilizing then firming again as a result of stronger market activity combined with some prompt replacements and holidays in the US. The tonnage list appeared thinner because activities in the Mediterranean and Black Sea increased as both crude oil and fuel oil shipments to eastern destinations rose. Similarly, tonnage availability for West Africa loading appeared tight, particularly for the first decade of August.
Freight rates for Suezmax in the Baltics and the North Sea remained strong as a result of sudden replacements due to port delays in Rotterdam, while in the Middle East, Indian charterers were mostly active by the end of the month. Suezmax spot freight rates on Northwest Europe-to-US routes edged up by 26% in July, compared with the previous month to stand at WS74 points, while West Africa-to-US rates gained 27% to average WS85 points.
On an annual basis, Suezmax spot freight rates increased by a remarkable 51% in July, compared with the same period one year ago. The Suezmax market was supported by an active VLCC market and firming Aframax market in July.
Aframax
Aframax spot freight rates exhibited the strongest gains in July among all dirty tanker classes. Spot freight rates registered increases on all selected routes over the previous month with no exception. Aframax spot freight rates in Northwest Europe increased as tonnage lists tightened and prompt replacements rose, leading to growth of 30% in spot freight rates for tankers trading on the Mediterranean-to-Northwest Europe routes compared with the previous month. Delays in Trieste and Port of Lavera supported freight rates to some degree. Mediterranean-to-Mediterranean Aframax spot freight rates increased by 27% in July.
While freight rates in the Caribbean were constantly firming against US rates, they experienced their largest increase in July, rising by 48% from one month earlier to stand at WS158 points. This was mainly supported by delays in the Caribbean and Mexico and a notable shortage in tonnage supply, as well as a lack of ullage and increased lighterage activity. Indonesia-to-East rates experienced a relatively small increase of 5% to stand at WS101 points.