Asian Aframax freight rates hit a two-year low June 22 amid a sharp decline in cargo volumes and an increasing surplus of tonnage in Southeast Asia and the Persian Gulf, S&P Global Platts data showed.
The key Persian Gulf-East route basis 80,000 mt was assessed at Worldscale 60 on June 22, equating to $12.34/mt. It was last lower April 5, 2018 at $12.48/mt, Platts data showed.
The fallout from the COVID-19 pandemic has resulted in demand dwindling for Aframax tankers, which are typically 80,000-120,000 dwt, resulting in a pile-up of ships in Southeast Asia and the Persian Gulf. Freight rates have been falling for four consecutive weeks, with shipowners unable to stem the free fall as they jostle to fix tonnage at lower levels simply to secure cargoes, market sources said.
“There’s like 12 prompt ships sitting in Singapore alone,” a broker said.
An Aframax on the Indonesia-North Asia route at w62.5 would see a time charter equivalent of $6,000-$7,000/day, market sources said. This compares with 16,000/day at the same time a year earlier.
Market sources said the weakness has resulted in charterers dictating rate levels as many were receiving more than 10 offers for their cargoes in the current market.
A weak Mediterranean market has cast a shadow over the Persian Gulf market, resulting in fewer ballasters leaving the region, an Aframax shipowner source said.
Cargo volumes were also low in the Persian Gulf amid a dearth of inquiries for fuel oil and crude loadings. “The Persian Gulf market has been quiet for a long time as consumption is low as well as [it doesn’t make sense to] run a refinery at full capacity,” a shipbroker said.
Many oil companies are also trying to use their own ships to cover cargoes, even if it involves a long ballast, to keep them out of a falling market, another Aframax shipbroker said.
The weakness has seen both the typical premiums for modern ships over tonnage older than 15 years and for carrying heated cargoes shrink, industry sources said.
“Now vessels have to wait five to seven days for fixing a cargo,” an Aframax shipowner said.
Southeast Asia and Australia were seeing fewer cargo inquiries despite a large number of ships being willing to take a longer ballast to Australia to pick up cargoes, market sources said.