VLCC MARKET DROPS PRECIPITOUSLY

By Urs M. Dür

The VLCC market ex Arabian Gulf has taken quite a plunge this in a few short weeks coming off of recent highs with rates off over 30 WS points, about 40%, to WS 50 to Japan and less, of course, west. These are still money-making rates but the steepness of the fall is not a “fun experience” as one spot broker put it. It appears the much predicted drop in the market expected in the end of Q2’03 is a self fulfilling prophecy today: Too many ships and not enough cargoes.

The FFA market is backing up those who think that the downturn might be sustained in that there are a swiftly growing number of sellers out there for Q3’03 and fewer and fewer buyers fro dropping offers in end Q2 and beginning Q3. “Nobody wants to try to catch what appears to be a falling knife,” said one FFA source.

Obviously, most damaged by the downturn will be companies heavily exposed to the spot market.

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