VLCC Rates Hit New Sky-High Record: $424,000 Per Day
Rates for VLCCs were already high before the U.S.-Israeli strike on Iran last weekend, but three days after hostilities began, charterers are shattering records. On Monday, spot rates for VLCC tonnage from the Mideast to China soared well north of $400,000 per day - enough to hire a seventh-generation drillship.
VLCCs normally charter for reasonable rates in the low- to mid-five digits per day, but began to clear the $100,000 benchmark in recent weeks due to rising OPEC exports, more floating storage and lower availability. Some hulls even chartered for more than $200,000 last Friday. But those numbers paled in comparison with the $424,000 per day that one tanker brought in for a Mideast-to-China shipment on Monday, as reported by Reuters.
Tonne-mile distances for the VLCC fleet are set to increase quickly. The Iranian government has officially closed the Strait of Hormuz to traffic, and tanker transits have tailed off dramatically. At one point late Monday, there were no tankers in the busy waterway at all, and dozens were grouped at anchorages on each side. (Low levels of traffic have since resumed, and U.S. officials say that there is no sign that Iran has attempted to patrol or enforce the blockade. In addition to the Iranian threat, owners are wary of getting under way without war risk insurance, and leading P&I clubs have suspended existing policies for the region effective March 5.
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Without ready access to the Arabian Gulf, refiners will have to buy crude from elsewhere, often further away - for example, West Africa, the U.S. Gulf Coast, Venezuela or Brazil. The added tonne-mile demand creates scarcity, resulting in higher day rates; low ordering activity in years past means that little new tonnage is coming to fill the gap in the near term.
Rates for LNG carriers are also soaring, up by 40 percent on Monday. Qatar has shut down its vast LNG plants because of the threat of Iranian strikes, cutting out about 20 percent of all global LNG export capacity. Major LNG buyers in East Asia and Europe will have to source more cargoes from alternative supply regions, like the U.S. Gulf and Australia - leading to longer voyages and vessel scarcity. European natural gas futures jumped by 50 percent on the news.
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