Product Tankers on the Rise

The product tanker market has been on the rise lately, as trade conditions are favoring ship rates. In a recent weekly report, shipbroker Intermodal said that “in Europe, refiners have faced challenges accumulating diesel inventories following the ban on Russian oil products despite notable diesel yields, while production has consistently remained below the average in Q2 and Q3. Insights Global reports that as of the week ending November 16, diesel and gasoil stocks in the ARA region fell by 39,000 mt to 1.684 million mt. This trend of declining inventories, evident since late September, has resulted in the lowest stock levels since October 2022, significantly trailing the 5-year average”.

According to Ms. Chara Georgousi, Research Analyst with Intermodal, “as Europe braces for the winter, a significant spike in heating oil demand, particularly in Germany, has intensified the diesel market. In November 2023, Europe’s diesel imports saw a notable increase, surpassing the previous month’s volumes. According to Refinitiv, total global diesel deliveries for this period reached approximately 4.98 million mt, a rise from October’s 4.62 million mt but still below September’s 5.78 million mt. This surge is primarily fueled by robust exports from the EoS region, which has become a pivotal player in the current market dynamics”.

“However, this trend is juxtaposed against the backdrop of declining shipments from the USG, attributed to heightened MR freight rates and persistent delays at the Panama Canal. These delays have not only affected shipment schedules but also contributed to global fleet distribution rigidity. The Panama Canal congestion is causing significant logistical challenges, impacting the ability of MR tankers to reposition effectively between the Atlantic and Pacific Basins”, Ms. Georgousi said.

She added that “as a result of changing market conditions, the trans-Atlantic MR tanker rates have experienced a significant surge. As of November 23rd, the daily TCE on the TC14 route reached $35,421 for a round-trip, a substantial increase from $23,337 just a week earlier. This rate significantly surpasses the 1-year average of $11,230 by 215.41%. Conversely, the EoS rates have witnessed a decline, and MR tanker rates from NWE are facing challenges due to high US gasoline stocks and reduced demand from WAF. Interestingly, tonne miles have been partly sustained by longer voyages to LatAm, which now represents the largest demand share at about 35%”.

Georgousi also noted that “an intriguing development within the MR tanker segment is the notable escalation in market valuations of older vessels. According to our most recent data, the current market value of 10-year-old MR tankers has surged to 32.52% above the 2022 average second-hand price, a stark contrast to the 72.48% increase compared to the 2021 average. Similarly, 15-year-old MR tankers show a significant uptrend in value, registering a 48.14% increase above the 2022 average and effectively doubling in value relative to their average market price in 2021. This trend may be influenced by the increasing strategic deployment of these vessels in specific routes or regions, amidst the evolving market dynamics”.

“The MR tanker market is likely to find additional support from recent developments in China. The issuance of an additional 3 million mt in fuel oil import quotas by China for non-state firms, increasing the total to 19.2 million mt for 2023, is expected to positively influence transpacific flows. This development could offset the potential limitations imposed by the high refinery run rates in East Asia and previously limited export quotas from China. Additionally, ongoing disruptions in the Panama Canal are likely to continue affecting fleet movements and rate stability, providing further support to the MRs in the short term. Looking forward, factors such as a limited orderbook, currently representing 6.6% of the MR fleet, and shipyard capacity constraints, coupled with the ongoing Panama Canal issues and regional market shifts, suggest that MR tanker rates are expected to remain robust in the coming years”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide