Clean Tanker Rates Set For Tumble
Rates for clean tankers in the Pacific Basin are set to tumble, undermined by dwindling Atlantic Basin demand displacing a vast fleet of cut-price medium-range ships, according to Oslo broker Lorentzen & Stemoco (L&S). "The Atlantic weakness is certainly going to spread to the Asian markets, unless the U.S. related trade improves soon," L&S said in a market report this week.
The build of U.S. gasoline and middle distillate stocks has somewhat narrowed arbitrages to the U.S. both across the Atlantic from Europe and across the Pacific from Asia, and this has eroded clean tanker rates in all regions. But L&S said Asian tankers markets had so far survived comparatively unscathed.
It estimated that medium-range tankers were earning about $15-17,000 per day in Asia, compared to $10,000 per day in Northwest Europe, but the Asian strength would soon be eroded.
London brokers said that transatlantic rates had fallen by over a third since mid-June. By contrast long-range markets from the Mideast Gulf to Asia on 55-75,000 tonners and inter-Asian medium range markets on 30,000 tonners had lost less than 10 percent.
Not only could the rot spread from Europe to Asia, but it could also spread from the medium-range tankers to the larger long-range tankers (LR1s and LR2s).
Historically LR2s (75,000 tonners) have been favored to carry naphtha cargoes from Kuwait and Saudi to Japan, but in recent months they have experienced increased competition from LR1s (55,000 tonners), which traditionally had targeted middle-distillate cargoes.
With medium-range rates at $10,000 per day, L&S said that LR1 tankers should be earning $15-17,000 per day. "As rates for LR1s are still yielding about $25,000 per day, we can safely say that the rate structure for the large product carriers looks quite vulnerable," said the report. - (Reuters)