Archives for posts with tag: fixtures

SIW1096The timecharter is a method of vessel employment familiar to anyone involved, even in passing, with the shipping industry. Since 1990, Shipping Intelligence Weekly has recorded activity levels for period chartering in the major bulk cargo markets. But in 2012 and 2013 so far, for the first time in a decade, liquidity in the tanker timecharter market has exceeded dry bulk. So what’s going on?

The Graph of the Month shows the pattern of ‘period’ fixture activity recorded for reported timecharters of one year or more in duration (i.e. excluding short period fixtures). This shows that, in terms of tonnage and vessel numbers, period fixing of bulk carriers soared through the boom years of the mid-2000s, before declining sharply. In 2012, 197 bulker fixtures over one year were recorded, totalling just 20.1m dwt. This means just 1% of dry bulk fleet capacity was newly fixed on a long timecharter in 2012, down from 14% in 2007.

Liquid Fixture Activity

Timecharter fixing of tankers (over 1 year) has been much more consistent, fluctuating around 130-150 fixtures per year in the mid-2000s, and 13-17m dwt. This is a consistent 4-5% of the fleet newly fixed each year, a share which has held true since the mid-90s.

A Product of MRs

Of course, weakening dry bulk sentiment was the key to the falling volume of bulker period fixtures. Tanker fixtures, meanwhile, have been bolstered by a large upturn in interest for MR product tanker period charter: 82 such fixtures were recorded in 2012 and 72 in 2013 so far. The positive picture for clean trades as US exports grow and new Saudi refineries start-up has generated a great deal of interest.
This compares to back in 2004, when Aframaxes represented 35% of tanker period fixing and growth in Baltic crude exports was making the shorter-haul Atlantic crude markets look much more positive than they do post-recession. Similarly, in the bulker sector, 144 Capesizes were fixed for over a year in 2008, whilst the average period fixed amongst reported fixtures reached 3.8 years in 2007. In the less heady days of 2013, only 26 new longer period Capesize fixtures have been reported, for an average of 1.5 years. And only 17 uncoated Aframaxes have been newly fixed (9% of all tanker period fixtures): all but two for periods of a single year. The continued fragility of demand and sentiment in these sectors means few charterers have the confidence to fix for longer period, unlike in the products market.

Back in the Day

So, for the time being, the market for longer period chartering of tankers is more liquid than that for bulkers, helped primarily by interest for product tankers. How long this will last is something only time will tell. Of course, this level of activity is nothing compared to the early 1970s, when an estimated 105m dwt of tanker tonnage was on period charter, predominantly to oil companies. This was around 80% of the fleet owned by independent shipowners, or 45% of the total tanker fleet. How times have changed! Have a nice day.

SIW1078“Following reports of China’s import figures for May, attention has focused on the data for crude oil imports. In January to April 2013, China imported 92mt of crude (including landborne trade), or 5.6m bpd, followed by 5.7m bpd of imports in May. In the year-to-date, imports by the major hope for crude oil trade growth are down by 2%. Is it time to plan for the worst?

Strategic Thinking

Well, maybe not. Clearly, the crude tanker markets are not in good shape, with evident oversupply, and demand weakness not helped by the effect which shale production is having on US import requirements. The freight markets remain fragile: in March, earnings levels on the eastbound routes from the Arabian Gulf dipped below $3,000/day.

Better Times

However, in the second quarter better fortunes were experienced. The VLCC spot fixture count in the Arabian Gulf during May came to a massive 162, including 123 eastbound fixtures. This compares to average eastbound cargoes of 91 per month in Q1 2013, and caused eastbound earnings to rebound to around $25,000/day in late May. The activity seen during May makes it likely that firmer import figures lie ahead.

What’s Happening?

Although the VLCC market has softened since, and fixture levels fell in June, there is a more fundamental reason not to take the weak Chinese trade growth data at face value. Early 2012, which forms the baseline for the negative year-on-year comparisons, was an extraordinary period for Chinese crude imports, well ahead of trend (see graph), with the government capitalising on conditions to acquire substantial volumes to fill Phase II of its Strategic Petroleum Reserve.

Something In Store

Relatively little is known about total Chinese storage capacity. The data on the graph has been estimated from the few figures which have in the past emerged on total Chinese stocks, both commercial and state-owned, plus the more-commonly published data on net stock changes. However, the trend is clear: the record imports of early 2012 occurred at a time of strong building of stocks. So the underlying level of imports for actual consumption remains positive.

Of course, this is partly academic as far as the VLCC market is con-cerned. Imports are cargo, whatever they are used for, and last spring there was more to go around and fewer ships. But there are causes for comfort: May fixtures show demand at levels better than before, year-on-year import growth is likely to turn positive again in 2H 2013 (imports are now heading back towards trend levels and stock build had slowed by 2H 2012), and many indicators of Chinese oil demand are improving. Furthermore, some reports suggest up to 55m bbl of additional SPR tank capacity could be completed and filled later in 2013. Now, that would be a pleasing development for the large crude tanker market. Have a nice day.