From Freightwaves via Benzinga, June 12, 2019 5:32pm:
The big news for ocean shipping freight rates this week is demand out of the oil-producing nations of West Africa, which is pushing up rates for the second-largest category of crude oil tanker.
The container sector has rebounded from May's travails, at least somewhat, while rates for liquefied natural gas (LNG) carriers have stumbled to a halt after their earlier rebound.
Suezmaxes surging
In the long-haul global crude trade, there are two main ‘workhorse' vessel categories: very large crude carriers (VLCCs), which each carry around two million barrels of crude oil, and Suezmaxes, which each carry around one million barrels. As their name implies, Suezmaxes are sized to fit through the Suez Canal; VLCCs are forced to take the longer route around the Cape of Good Hope.
A key market for Suezmaxes is West Africa. While VLCCs are also active in this market, West Africa is known more as Suezmax territory. With outbound volumes rising from exporters such as Nigeria, this asset class is enjoying much higher rates.
Clarksons Platou Securities reported that as of June 12, Suezmax rates were averaging $26,700 per day, up 73 percent week-on-week and almost double current VLCC rates, which are at $13,600 per day. "Suezmax earnings continue to rise, with rates improving largely on higher activity out of West Africa," said Clarksons Platou Securities analyst Frode Mørkedal.
Amit Mehrotra, a shipping analyst at Deutsche Bank, also highlighted West African crude exports, which he sees as helping VLCCs offset weakness out of the Arabian Gulf, as well as supporting Suezmaxes.
"Not surprisingly, the Suezmax segment was the biggest beneficiary of firmer sentiment out of West Africa, with rates surging," said Mehrotra, who noted that "this may be a short-term blip, as we see available tonnage in the market; however, it provides an important reminder of how quickly and unexpectedly spot shipping rates can tighten."
Both the U.S. and West African nations produce primarily light, sweet crude. West African crude used to be predominantly sold to the U.S., but since the shale oil boom, West Africa has been largely shut out as U.S. light, sweet import volumes have plummeted.
At first, it was believed that this dynamic would be negative for crude tanker demand, but it actually turned out to be a positive. West Africa crude flowed to Asia instead of the U.S. – a voyage that is around twice as long, and thus, the same cargo volume soaks up twice as many VLCCs and Suezmaxes.
Public companies with Suezmax shipping exposure: Nordic American Tankers NAT, Euronav EURN, Frontline FRO 0.14%, Teekay Tankers TNK, Diamond S Shipping DSSI 0.09%
Container shipping stabilizes
It was looking ugly for the trans-Pacific container trade in the month of May, as the price to ship containers along that route fell sharply. But rates jumped in early June and appear to have stabilized. Between June 1 and June 12, the Freightos Baltic Daily Index (China-North America West) has remained stuck on a plateau that's well above May lows.
And despite the pessimism that prevailed last month, a variety of indices measuring the cost of shipping containers from China to the U.S. all show small growth year-on-year, in the low- to mid-single digit range........MORE
