In Hellenic Shipping News 15/04/2015
MR (Medium Range) tankers could be in for a positive surprise, as shipbrokers estimate that the market could be headed towards a substantial increase. In its latest weekly report, shipbroker Charles R. Weber said that “demand for MR tankers on the USG rose 46% this week to a 13‐week high of 41 fixtures. The discharge profile shows 10 of these bound for points in Europe, which represents a YTD high and follows strong demand over the past three weeks for such voyages. During the week ending 3/27, we noted a record number of LR1s fixed for voyages from the USG which ultimately arrested a positive rate progression for MRs in the region, leading to two weeks of losses. However, with very few LR1 units remaining available following that surge, demand has been firmly oriented to MRs” said the shipbroker.
CR Weber added that “the stronger MR demand has drawn on availability and the tally of two‐week forward positions at the close of the week dropped 54% w/w. With just 21 units showing certain availability, USG MR supply stands at its lowest level since we began tracking it on this basis at the start of 2014. Despite what now appears to be an increasingly tight market, rates remain relatively low – at least when compared with the current supply/demand position. The USG‐UKC route saw rates drop from the low ws80s at the close of last week to the mid‐ws70s earlier this week before rebounding to the ws90 level presently. Before the LR1 demand surge at the end of March, the route had seen rates rally into the mid‐ws140s”.
According to the shipbroker “the stronger USG CPP export demand follows the progressing of PADD 3 (USG) refineries from seasonal maintenance – as well as expectations that these refineries will process at high rates during the upcoming months thanks to a growing glut of US crude inventories. Against planned turnaround schedules in Europe and globally which show a collective May peak, pricing dynamics on both sides of the Atlantic have been more supportive of trans‐Atlantic distillate arbitrage opportunities. Moreover, Latin American demand for USG product has continued to grow forming a stronger structural MR demand position; more recently some cargoes originally bound for points in Europe were also diverted to Brazil, possibly due to large fire at UltraCargo’s product storage facilities at Santos terminal which lasted for more than a week and likely impacted operations at Petrobras’ nearby 178,000 b/d RPBC refinery”.
It worth noting that “the USG demand gains also follow recent MR demand strength throughout the Atlantic basin which has seen more gasoline heading to the USAC as well as an increasingly diverse profile of trading patterns as European refiners benefitted from improved margins and product exports from the Baltic were pushed to destinations further afield than the UKC area. These factors have allowed availability in key loading areas to decline from higher levels which accompanied better MR trading efficiency (a usual negative for tanker trades) during 2014 which weighed negatively on rates accordingly”, said CR Weber.
The shipbroker concluded that “with USG export demand expected to remain strong during the upcoming week, the low level of availability is very likely to support significant rate gains. Though there are seven MR units freeing on the USAC which could service USG demand, the present disparity between the UKC‐USAC and USG‐UKC routes implies that at least early during the upcoming week some of these will undertake return ballasts to Europe before USG rate strength materializes sufficiently to firmly draw them to the USG. Additionally, even when adding the USAC positions in their entirety to USG availability, we note that USG availability levels would remain at their lowest level in over a year”.
