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Product Tankers and the Rhine Low-Water Level Issue

The product tanker market in Europe in being affected by weather conditions over the past few months. In its latest weekly report, shipbroker Gibson said that “low water levels on the Rhine have remained a persistent problem for the European commodity markets since the summer, forcing many refineries and industrial plants to reduce production, and in some cases to declare force majeure. Whilst most industries would have expected and planned for such lows over the summer months, few would have expected these levels to persist, and indeed worsen as the markets move deeper into winter. Indeed, just as one might have seasonally expected levels to rise, they receded. Early in October, depths at the key measuring point of Kaub (not far from Frankfurt) reached a record low of 25cm and have shown little material improvement since then”.

According to the shipbroker, “the impact of such low levels has not just been felt by the local barge market, and has reverberated all the way down the Rhine to the Amsterdam-Rotterdam-Antwerp (ARA) trading hub and beyond. Initially ARA stocks rose in response, with product supplies backing up down the river, as shallow waters forced barges to reduce cargo loads. In some cases, loads have fallen to less than 20% of potential loading capacity, whilst local media reports suggest that movements on the upper Rhine have all but stopped, significantly disrupting industrial activity”.

Gibson added that “middle distillate stocks should be rising ahead of winter, particularly given the inability to get products up river, but have in fact fallen by nearly 1 million tonnes since October. Lower stocks have been facilitated by lower imports, re-exports and diversions away from the ARA hub in the wake of persistent logistical issues and a backwardated gasoil market. However, water levels will rise eventually. For now, the consensus among meteorologists is that rainfall will remain limited for the next month or so, meaning water levels could ease off further. Yet, once the rains return and water levels do start to rise, buying activity into the ARA hub will firm, perhaps substantially if stocks continue to fall over the coming weeks. This resurgent demand would of course translate into firmer product tanker demand and should provide a short term boost to distillate flows from the US Gulf, Baltics and Middle East into ARA, provided we don’t see too much competition from newbuild crude tankers trading product into Europe from Asia”.

Meanwhile, in the crude tanker market this week, Gibson said that “moderate VLCC fixing with Charterers concentrating upon older, and more challenged, units to secure noticeable discounts from still resilient modern tonnage. Within short, the bargain supply will run dry, and attention will be forced onto the more expensive vessels and if next week becomes busy, those Owners will look to quickly take advantage. For now, rates for older units to the East move at down to ws 80, with younger ladies looking into the low ws 90’s, with runs to the West remaining marked in the low ws 40’s. Suezmaxes, that had been on the backfoot, at last showed some sparkle as Owners became more attracted to ballasting opportunities. Demand picked up and rates to the West gained to as high as ws 70, with runs to the East into the ws 130’s. Aframaxes were already in the mood to jump, and a busy week throughout the area, and further East, allowed rates to upshift to 80,000mt by ws 165 to Singapore with further gains, or consolidation, at least, anticipated for next week”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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