Tanker Market Fails To Take Off During January
The tanker market is still lingering close to multi-year lows at the beginning of 2022. According to the latest monthly report from OPEC, coming off a year that saw multi-decade lows, dirty tanker spot freight rates started 2022 close to the bottom end of the five-year range, despite rising bunker fuel prices weighing on earnings. VLCC rates continued to languish in the doldrums, while Suezmax and Aframax continued to perform relatively better, although earnings were impacted by higher bunker prices and softening demand amid efforts to mitigate the spread of Omicron. Clean rates experienced similar trends, with rates showing a seasonal decline following a slight lift at the end of last year supported by heating fuel demand and gasoil flows. Looking ahead, the tanker market began 2022 facing the still formidable task of navigating the resulting impacts of the collapse in demand in 2020 associated with the COVID-19 pandemic. While demand for tankers is returning following the unwinding of record-high inventories, fleet growth has continued, lengthening the time needed to return the market to balance. While 2021 missed the general lift expected at the end of the year, expectations foresee an improvement in rates toward the second half of this year, with a more sustained market balance emerging in 2023.
The latest estimates show global spot fixtures increased in January, starting the year with an average of 13.82 mb/d. This represents an increase of 0.2 mb/d, or around 1.5%. Compared with the previous year, spot fixtures were 1.2 mb/d lower, representing a decline of almost 8%. OPEC spot fixtures were broadly unchanged m-o-m in January, averaging 9.4 mb/d. Compared with the same month in 2021, they were about 0.6 mb/d, or 6%, lower. Spot fixtures from the Middle East-to-West showed a strong recovery, increasing by 0.3 mb/d m-o-m in January, to average 0.9 mb/d. Y-o-y, rates were broadly flat, up just 1%. Middle East-to-East fixtures increased m-o-m by 0.7 mb/d, or around 11%, to average 6.3 mb/d. Compared with the same month last year, eastward flows were 0.4 mb/d, or 6%, higher. Outside the Middle East, fixtures fell sharply to average 2.2 mb/d in January. This represents an almost 1 mb/d, or 31%, decline m-o-m and a roughly similar decline y-o-y.
Sailings and arrivals
OPEC sailings declined m-o-m in January to average 22.5 mb/d, representing a drop of 0.8 mb/d or 3%. OPEC sailings were 1.2 mb/d, or around 6%, higher compared with the same month of the previous year. Middle East sailings increased m-o-m in January, up by about 0.3 mb/d, or about 1%, to average 17.6 mb/d. Y-o-y, sailings from the region rose 1.7 mb/d, or around 11%, compared with January 2021. Crude arrivals were generally lower in January, with the exception of arrivals in the Far East. Arrivals in North America declined by just over 1%, or 0.1 mb/d, to average 8.8 mb/d. However, y-o-y, North American arrivals were 0.5 mb/d, or over 5%, higher. Arrivals in Europe declined by 0.7 mb/d, or 5%, m-o-m in January to average 12.1 mb/d. This was 0.6 mb/d, or 6%, higher than in the same month last year. In West Asia, arrivals declined m-o-m in January, dropping by 0.5 mb/d, or close to 6%, to average 8.4 mb/d. This represented a y-o-y gain of 1.6 mb/d, or almost 23%. Arrivals in the Far East bucked the generally lower trend, increasing by 0.3 mb/d, or around 2%, m-o-m to average around 15.1 mb/d. Y-o-y, arrivals were 1.6 mb/d, or about 12%, higher.
Dirty tanker freight rates
Very large crude carriers (VLCCs)
VLCC spot rates continued to languish in January, starting the year 3% lower than in the same month of 2021. M-o-m, VLCC spot freight rates were 14% lower on average, with rates across all selected routes moving lower.
Rates on the Middle East-to-East route were marginally higher y-o-y, averaging WS36 points. M-o-m, rates were 10% lower, pressured by ample availability. After remaining flat over the previous months, rates on the Middle East-to-West route fell by 25% m-o-m to average WS18 points, impacted by softness on the Middle East-to-East rates. This represented a y-o-y decline of 22%. West Africa-to-East spot rates were 3% higher y-o-y, averaging WS37 in January. Compared with the previous month, rates on the route were 10% lower, with flows to China expected to be somewhat muted in 1Q22.
Suezmax rates came off better performance seen the month before, declining 16% m-o-m in January, although with some improvements seen towards the end of the month amid increased bunker prices. Y-o-y, however, rates were 24% higher. Rates on the West Africa-to-US Gulf Coast (USGC) route increased by 23% in January, compared with the same month last year, averaging WS53. Compared with the previous month, rates were 15% lower. Spot freight rates on the USGC-to-Europe route started the year 24% higher than in the same month last year, averaging WS51 points. M-o-m, rates were 18% lower.
Aframax rates also managed to start the year higher than in the same month last year. Spot Aframax rates were 33% higher y-o-y. Compared with December 2021, rates declined 16%. Rates on the Indonesia-to-East route were 64% higher in January compared to the same month last year, averaging WS95. M-o-m, rates on the route declined by 8% amid growing availability and reduced fixtures. Med routes fell further in January, dropping by around 11% m-o-m, with the Cross-Med route averaging WS94 and the Mediterranean-to-NWE route averaging WS83. Compared with the same month of the previous year, rates on both routes were around 31% higher.
Spot rates on the Caribbean-to-US East Coast (USEC) route erased the previous month’s gain, declining by 28% m-o-m to average WS97. Y-o-y, rates were 13% higher
Clean tanker freight rates Average clean spot freight rates started the year with a y-o-y improvement, up 21% from the levels seen in the same month last year. Gains were driven primarily by the strong performance West of Suez, where rates were 30% higher, while East of Suez rates were up by 4% y-o-y. M-o-m, rates fell from a strong showing in December.
In the East of Suez, rates on the Middle East-to-East route averaged WS100, representing a y-o-y increase of 23%, while falling 22% m-o-m. Freight rates on the Singapore-to-East route experience the sole y-o-y decline on selected routes, down 8% to average WS129. This was a fall of 7% compared with December 2021.
In the West of Suez market, rates on the Northwest Europe (NWE)-to-USEC route rose 22% y-o-y to average WS134 points. They were 22% lower than the relatively good performance seen the month before. Rates in the Cross-Med and Med-to-NWE outperformed the same month last year by 40% and 28%, respectively, to average WS168 and WS177 points. Compared with the previous month, rates were around 30% lower on both routes.
Source: Nikos Roussanoglou, Hellenic Shipping News Worldwide