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CPP Tanker Ton-Mile Demand

In examining bilateral country trade flow data, we recorded a 2.1% rise in CPP ton-mile demand distributed across the four tanker segments we analyze (Figure). At 2.23 trillion ton-miles, CPP marine transportation requirements make up 17.3% of all tanker demand, the highest on record. By comparison in 2000, CPP marine transportation accounted for just 7.79% of total tanker demand.

LR vessels represent approximately 50% of clean transportation demand. We project annualized growth of 2.0% and 2.5% for the LR2 and LR1 sectors through 2022. We are likely to see more intra-regional trading in Asia for these tankers amid increasing volumes, but between shorter distances. At the same time, the US Gulf will continue to balance out deficits in the Caribbean and South America, while Europe’s Mediterranean region will exhibit significant intra-regional trading. We project MR2 demand to grow by 1% per annum through 2022.

We note a significant turnaround in European loaded barrels headed to the Far East, particularly naphtha. The Far East market is chronically short naphtha, a product used as a feedstock for petrochemical plants, but also in gasoline blending. In 2017, we note Far East supply of naphtha increased to 2.4 million b/d, while demand accelerated by a stronger 160,000 b/d to 3.6 million b/d. On the heels of relatively strong refinery margins for the Mediterranean complex, incremental supply growth was shipped out to the East to help offset the naphtha deficit. For the LR2 tanker class, this resulted in 16% growth year-on-year, with our projected balances through 2022, pointing to continued growth of about 4.9% per annum.
Source: McQuilling Partners, Inc.

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