East Asia Aframax earnings spike as Persian Gulf attracts more tonnage

Several Aframax tankers have recently ballasted to the Middle East from Southeast Asia, resulting in a reduction of supply and rebound in rates in the Indonesia-Singapore region, market participants said Monday, January 19.

In a trend reversal, freight rates on Indonesia to North Asia routes are now fetching higher returns for owners than voyages on Persian Gulf to East routes.

The key Indonesia to Japan rate was assessed at w111 Friday, up from w102 as recently as January 7, when it had hit an eight-week low, Platts data showed.

The Persian Gulf to East route was assessed at w110 Friday, down from w114 at the start of the year on January 2.

Earlier this month, subdued demand as the market emerged from the annual holiday season saw ships ballasting to the Red Sea and Persian Gulf in search of cargoes.

Ships that ballasted from East Asia include the Ocean Queen, the Banda Sea and the Libra Sun, said brokers, owners and charterers.

The supply of ships in Indonesia and Singapore would have been much bigger than it is at present had it not been for ballasting of these ships to the Middle East, said an Aframax broker in Singapore.

Ships that ballast to the Persian Gulf can get locked in for voyages of longer duration, taking up cargoes directly for delivery into North Asia or first doing a cross-Persian Gulf, or Red Sea voyage before opting for another Persian Gulf-East trip, said a source with an Aframax owner.

Another option available for them is to do a voyage to Europe.

Recent weather related delays in the Mediterranean have been supportive for the Aframax rates, a second source with an owner said.

The Ocean Queen has been taken up by PetroChina for a cross-Persian Gulf voyage this week and it is subsequently expected to embark on a trip to the East, sources said.

Banda Sea is expected to load a cargo for BP later this week with options open for a voyage to both East Asia and Europe, they said.

“In the Red Sea, the sustained inquiry for Aframaxes, [only] a few naturally opening ships and firming of the rates in the Mediterranean should prompt an uptick in rates,” an international shipping brokerage said in its report on the Aframaxes.

In the Persian Gulf, the market has slowed down but there are not many open ships and the sentiment is unchanged, the report said.

Another ship, the Yang Ning Hu was also expected to ballast to the Middle East but changed its plans after getting an attractive rate for a voyage to Australia, brokers tracking the developments said.

The ship is now scheduled to load a cargo of non-heated crude this week from two ports including Santan, they said.

“These ballasters from Singapore helped to ease the supply a little in the Persian Gulf,” another broker said. A natural corollary to this trend is that the premium in worldscale points that Persian Gulf-East voyages have traditionally enjoyed over Southeast Asia to North Asia or Australia routes, has almost disappeared.

At times such as the present, they are even at a discount.

This reversal in worldscale premiums is also reflecting in the earnings of owners.

Early last month, an owner could earn around $37,600/day on a round trip from Kuwait to Singapore, which was almost $4,000 higher than on a voyage from Dumai to Japan, according to estimates of the shipping industry officials.

By the end of December the trend had reversed, Dumai-Japan voyage was fetching $2,000/day higher than the Kuwait-Singapore trip, they said.

Now, the gap in daily earnings in favor of Dumai-Japan is even larger at $4,000, they added.

This explains why some ships such as the Yang Ning Hu changed their plans regarding ballast to the Persian Gulf and preferred to stay put in East Asia, sources said.

On the near-term outlook, a lot will depend on how demand pans out in the next few days and weather in the Bosphorus Strait, where delays due to fog can push up rates and make ballasts attractive, they said.

“Several cargoes are seeking tonnage in the January 25-30 window for voyages on the Indonesia to North Asia,” said a source with an Aframax owner.

However, brokers are skeptical, pointing out that there are sufficient ships to meet this demand, which in turn can cap gains for owners and even soften the rates.

There are 23 Aframaxes expected to open in Southeast Asia in the next two weeks, one of the brokers said.

He said currently there are not more than 10 cargoes seeking tonnage.

In the Persian Gulf, the number of ships to open up in the rest of the month are barely 10 but there are not many cargoes either.

In Southeast Asia, the market is trading sideways as the number of ships and cargoes is balanced, the international brokerage report said.