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2024's early signs suggest a very promising start for the tanker market

2024's early signs suggest a very promising start for the tanker market, particularly in the product sector. Contrary to the previous 6 years' trends, which indicated a downward trajectory for product markets during the first months of the year, 2024 has bucked the trend. Since the beginning of January 2024, the MR Pacific Basket has experienced a remarkable doubling of its earnings to USD 56,707/day, climbing to the highest level since late December 2022. Meanwhile, the MR Atlantic Basket has also witnessed a surge, reaching USD 36,460 per day, representing an increase of approximately 31% since the start of the year. Furthermore, the LR1/LR2 rates linked to Middle East surpassed USD 100,000/day and have doubled since 2nd January 2024. Mainly, the LR2 TC1 route (Middle East Gulf to Japan) closed the week at USD 100,894/day, the highest level since mid-May 2020. The LR1 TC8 route (Middle East Gulf to UK-Cont) pays currently USD 102,274/day, exceeding even late April's 2020 highs. Finally, the LR2 TC20-TCE route (Middle East Gulf to UK Cont) is paying USD 121,520/day.

The Middle East crisis has not only driven north the freight rates but also the bunker prices. Prices for very low sulfur fuel oil in Singapore are surging rapidly, driven by robust demand from shipowners topping up their vessels' fuel tanks to maximum capacity in anticipation of rerouting around the Cape of Good Hope. VLSFO bunker price in Singapore is now trading at USD 655/mt, a 10% increase compared to mid-January's 2024 prices. Oil prices are also following the upward trajectory, with WTI and Brent climbing to USD 78/barrel and USD 83.5/barrel respectively, achieving a second consecutive week of gains and reaching the highest level in nearly two months. The oil price surge was caused by a combination of factors, including strong economic growth in the US, positive signals of Chinese stimulus, and concerns about oil supply from the Middle East. The United States, expanding at an impressive annualized rate of 3.3% in the last quarter of 2023, defied recessionary fears. Meanwhile, the central bank of China significantly reduced bank reserves and infused approximately $140 billion into the banking system, bolstering demand. Additionally, concerns about supply disruptions from the Middle East have provided further support.

In the dry bulk market, an increased number of grain-carrying ships have been diverting around the Cape of Good Hope instead of passing through the Suez Canal, due to recent attacks on vessels in the Red Sea. This trend has resulted in approximately 3.9 million tons of grain cargoes taking alternative routes, a significant number considering that around 7.7 million tons of grain cargoes transit the Suez Canal into the Red Sea each month. In the meantime, Ukraine has managed to boost its Black Sea grain exports to a level not seen since before Russia's invasion. Kyiv's achievement in replacing an UN-backed Black Sea export deal with its own shipping scheme has brought relief to Ukrainian farmers and importing countries.

S&P activity:

Dry

Another week brings significant activity to the dry bulk market, with 20 transactions reported. Supramaxes dominate the scene with 9 deals concluded. The Capesize "Royal Iole" – 180k/2009 Imabari fetched USD 24.1 mills to Chinese buyers. The post-panamaxes "Charlotte Oldendorff" 93k/2010 Yangfan and "Christine Oldendorff" 93k/2010 Taizhou Kouan were sold for USD 15.45 mills each to undisclosed parties. The Indian built Ice Class 1C "Golden Bull" – 75k/2021 Pipavav changed hands for 16 mills while the six-year-older Japanese-built "Artemis" – 77k/2006 Namura was sold for USD 13 mills. In the Panamax segment, the "Magic Nova" - 79k/2010 Sanoyas was sold for a price of USD 16.1 mills and the "Magic Horizon" - 77k/2010 Shin Kasado was sold for a price of USD 15.8 mills. In the Supramax segment, the "Sea Star" – 56k/2014 Jiang Dong was also sold to Greeks for USD 16 mills, "King Baton Rouge" – 56k/2014 Mitsui was sold to clients of Montenero for USD 22 mills and the "Tomorrow" – 56k/2013 Minaminippon was purchased by Greek interests for USD 18.7 mills. The Handy "Rui Fu Xing" – 37k/2012 HMD was sold for mid 16 mills and "Nordic London" – 35k/2010 TK Shipbuilding was sold for USD 12.5 mills

Tanker

The low activity of the tanker market compared to the dry bulk sector continued this week as well, with only nine transactions. The VLCC "Tohshi" – 300k/2007 IHI was acquired by Chinese interests for USD 44 mills. The Aframaxes "Esther Spirit" – 115k/2004 Samsung and "Everest Spirit" - 115k/2004 Daewoo were sold separately for USD 24 mills each. The MR2 "GH Austen" 50k/2009 GSI was sold for USD 22.8 mills with pending surveys, while the two-years-older "FOS" – 49k/2007 Iwagi changed hands for USD 22.5 mills. Finally, the stainless steel "Chemroute Oasis" – 26k/2011 Shin Kurushima was sold for USD 26 mills.

Xclusiv Shipbrokers Inc.