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Wednesday, December 13, 2017

The aframax market

In January-February the aframax market was the strongest segment. It remained so until the end of May, but the summer has proved unfavourable for this segment, and it is still in the doldrums. 

 Assuming a balanced market end 2006 and an annual increase in demand of 4.5%, a small surplus may start to build up in 2007. The surplus will increase in 2008 and in particular in 2009, with deliveries expected of 8.2 m dwt and 11.4 m dwt respectively. Under these assumptions, no new orders are needed for delivery before 2012 in order to maintain at least a market balance.

 

We have recorded 27 aframax period contracts so far this year with an average rate  of USD 27,231 per day, an average tanker size of 100,900 dwt, average age of 7.8 years and an average period of 1.9 years, ranging from one to three years.  

 

This compares to 49 aframax period contracts in 2006 with an average rate of USD 30,100 per day, an average tanker size of 103,848 dwt, average age of 7.9 years and an average period of 1.6 years, ranging from half-a-year to five years.  

 

In 2005 we recorded 45 aframax period contracts with an average rate  of USD 31,224 per day, an average tanker size of 103,9381 dwt, average age of 7.3 years and an average period of 2.2 years, ranging from half-a-year to seven years.

 

It may be observed that the period rate is slightly softer but that the longest periods fixed are significantly shorter.

 

We have recorded 9 aframaxes sold for demolition so far in 2007 and we have 18 more scheduled for phase-out, but some of these may have been converted.  In addition, we have recorded 4 sold for conversion to FPSOs. In 2006 we recorded 9 sold for demolition and 3 sold for conversion, and in 2005 we recorded 21 sold for demolition but we have no figures for those converted. 

 

The aframax market is not easy to analyse as there are so many different geographical segments in addition to the LR2 clean market.  New export refinery capacity in India and the Middle East may benefit the LR2 market, but this will not be for a couple of years.  Increased exports from the Former Soviet Union should benefit aframaxes.  The largest increases over the last year concerned  products and exports via the Baku - Tblisi – Ceyhan (BTC) pipeline (see Weekly NEWS No. 36/2007 dated 31 August 2007).

 

Exports from other large aframax areas, such as Primorsk in the Baltic and Venezuela, are expected to be steady.

 

Prices of both newbuildings and second-hand tankers remain high and may remain so due to the tight shipbuilding capacity which is now being brought about by bulk carriers.  Capacity is, however, increasing both in South Korea, China and other places, which places a reliance on continued ordering, without which prices could soften.

 

The graphs below plot the aframax transactions in 2003 and 2007 by age.

 Contact: Erik Ranheim