Asian VLCC rates edge closer to year's low of w30 on excess supply

An acute oversupply of VLCC tankers looking to haul crude from the Persian Gulf to North Asia has driven the Worldscale freight rate on this route closer to the year's low of w30, shipping sources said Wednesday.
While close to 90 VLCCs are available for employment in the next four weeks out of the Persian Gulf, there are 51 ships at disposal for the remaining part of April, according to a broker following the VLCC market.
With the April loading program having seen close to 107 spot cargoes being covered, the stems left uncovered for this month could be far fewer than the 51 ships available for trading in April.
"The surplus tonnage situation is too severe. The number of ships available is beyond anyone's expectation. The cargoes from Japanese and South Korean [charterers] have decreased for April loading [dates due to refinery turnarounds]," a chartering source said.
The slowdown in the chartering activity from the Japanese and South Koreans is adding more vessels to an already oversupplied tonnage list.
"We are pretty much at this year's low [freight level] at the moment. But I don't see it going below the w30 mark and there aren't any positive factors that can get the market up or improve the situation," a derivative broker following the VLCC market said.
The benchmark Persian Gulf to Japan VLCC route was assessed at w30.75 Tuesday, just w0.75 above this year's lowest of w30 assessed on January 28.
One of the main problems for the shipowners is that the surfeit of vessels in the market has seen VLCC charterers receiving between 10-12 offers on most occasions when they quote their cargoes, sources said.
"Every time I quote my cargoes, the competition [between owners] is very high. So I can get very good numbers. The owners are nervous and to avoid long waiting period [without a cargo], they are willing to fix at lower levels," the chartering source said.
Some market-watchers said the current earnings for a shipowner from a VLCC performing a Persian Gulf to Japan voyage would be around $800/day at a freight rate of w30.75, while others felt the returns would be negative.
"The owners are on a suicidal path at the moment. There is no rationale behind [fixing ships at these current levels]. But some owners are getting agitated and will fight back. The time charter equivalents are so poor," a source working for a VLCC-owning company said.
Source: Platts