The freight rate for the key West Africa-UK/Continent Suezmax run, exclusive of EU Emissions Trading Scheme costs, dropped below the psychological level of w100 on July 2, with sources pointing to a seasonal decrease in demand and a well-stocked tonnage list in the Atlantic region.

Platts, part of S&P Global Commodity Insights, assessed freight on the 130,000 mt WAF-UKC route at w102.5, inclusive of EU ETS charges, on July 2, while the EU ETS exclusive rate was assessed at w99.5. The last time the market was lower than this was on May 15, when the EU ETS exclusive rate stood at w97.5.

The last done rate for a WAF-UKC Suezmax voyage, inclusive of EU ETS costs, remains w112.5; however, sentiment has softened considerably since this level.

“There are lots of eastern ballasters, and the market is quiet,” a Middle East-based Suezmax broker said. “Things are holding up more than we thought, but I think the next cargoes will correct down.”

The tonnage pool for Suezmax cargoes is also being inflated by competition from VLCC vessels exiting a softer VLCC market in search of part-cargo opportunities, an Asia-based shipbroker said.

“Lack of volume is the main factor,” a London-based Suezmax broker said. Crude tanker demand levels are usually weaker in the summer due to lower heating demand, according to sources.

Commenting on the outlook for the Suezmax market for the rest of the summer, a second Middle East-based shipbroker said he expected rates to decrease during July and August, with only September possibly bringing some respite for owners.

The Asia-based shipbroker offered a slightly different perspective on the outlook for the Suezmax segment. He granted that the market is currently skewed in favor of charterers, with healthier levels for owners in the range of w30-w40 higher than they are currently, but added that he thought rates were unlikely to rise or fall significantly over the next few months.

Source: Platts