Home / Shipping News / International Shipping News / Asia Clean Tanker Market Outlook Q3 2017: MRs Are The Only Bright Spot

Asia Clean Tanker Market Outlook Q3 2017: MRs Are The Only Bright Spot

While the situation may not be as dire as the crude tanker sector, newbuilding deliveries are expected to continue to keep a lid on product tanker rates in Asia over Q3. The pace of deliveries is expected to pick up in 2H, bringing the net fleet growth for 2017 to 3-4%. Around 30% of expected LR2 newbuild deliveries and 25% of expected LR1 newbuild deliveries this year have taken place so far.

On the demand side, higher June and July naphtha inflows from the West on the back of a wide East/West spread have led to a build-up in buyers’ inventories. As such, this is likely to displace some flows into Asia, resulting in less movements along the benchmark AG-Japan route and further pressuring LR tanker rates in Q3. According to Platts, around 1.2 to 1.3 mmt of European naphtha is expected to arrive in Asia in July (flat m-o-m), almost 20% higher than the year-to-date monthly average of 1.02 mmt.

Moreover, while North Asian naphtha import volumes are relatively steady, naphtha imports into China have been dropping steadily due to increased domestic output. Chinese naphtha imports from January to May were down by 22.2% y-o-y to 154 kb/d, and are expected to continue easing over Q3. The strength in the Asian gasoil market has led to a persistently strong EFS which has kept the East-West arb closed this year, resulting in less LR tankers moving along the key AG/Europe routes. This is expected to continue to weigh on the Asian LR market in Q3.

Things look a little brighter for the Asian Medium Range (MR) segment which has recently rebounded from multi-year lows. Chinese product exports in Q3 are likely to be supported by the recent release of the third batch of fuel export quotas, the conclusion of refinery maintenance season as well as lower domestic demand for gasoil due to a nationwide fishing ban. The third batch of fuel export quotas (under both processing trade and general trade terms) stand at 15.4 mmt, which is 231% higher than the previous batch and 152% higher y-o-y. This leaves much room for exports to grow in Q3, which could help to keep a floor under MR rates.
Source: OFE Insights

Leave a Reply

Your email address will not be published. Required fields are marked *



Please enter the CAPTCHA text

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping