Rise in long haul trade flows boosts Asian MR rates


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By Claire Grierson, Senior Director, SSY Tanker Research.

 

Asian MR rates have jumped in recent weeks with South Korea-Singapore earnings up to $13,000/day by mid-August, the highest since May 2020, while Singapore-Australia returns have risen to a 15-month high of $16,000/day. A growing surplus of refined products in Asia (amidst reduced domestic demand in some countries due to Covid restrictions) have led to longer haul trading opportunities, such as to the west coast Americas, while there has been reduced competition for MR cargoes from the LR sector, which has been bolstered by robust Asian naphtha demand amidst high LPG prices (an alternative feedstock for steam crackers) and healthy petrochemical margins as well as greater refined product import demand from Europe and Africa.  

Jet and diesel have been moving to the USWC and diesel to Argentina. More than 240K b/d of refining capacity on the USWC has shut since last year and with the country liberalizing travel during the summer, boosting oil demand growth, this helped to open up the arbitrage window for distillates supplies from North Asia. USWC jet stocks had fallen to 7.27M bbls in early August, the lowest since May 2015, Energy Information Administration (EIA) showed. Trade flows from South Korea were particularly robust, as the North Asian country was also facing a drop in product import demand from nearby Japan, which extended its Covid-19 emergency measures. Japan’s product output was also lifted when a couple of its refineries with a combined capacity of 270K b/d returned online, pushing domestic refinery processing rates to the highest level since mid-February. Besides sending fuel to the USWC, South Korea refiners also diverted more product to Australia and this raised product tanker tonne miles.

Tonnage supply in Asia has also been trimmed as vessels were drawn towards the Middle East Gulf, where trade flows to Africa accelerated. This is following the shutdown of Engen’s refinery in Durban, South Africa since December last year when a fire broke out, while Sapref’s 180K b/d refinery in Durban was also briefly shut in July due to civil unrest in the country. Tonnage availability for LRs in the Middle East had tightened considerably, especially for the LR1s, after a flurry of mid-August cargoes onwards, with demand from the UKC (for jet, gasoil and ULSD), East Africa (for ULSD & gasoline) and West Africa (for gasoil), and the usual naphtha into East. So, a number of long-haul voyages are tying up vessels.

Asian MR TCE

 

Source: SSY

 

Market reports and research publications are provided for general information only. They do not constitute advice or amount to a recommendation to enter or not to enter any specific transaction. While every care has been taken to ensure that the information in these publications are accurate, Simpson Spence Young accepts no responsibility for any errors or omissions or any consequences arising therefrom. Figures are based on the latest available information, which is subject to subsequent revision and correction. The views expressed are those of SSY Consultancy and Research Ltd and do not necessarily reflect the views of any other associated company. Reproducing any material from this report without permission from Simpson Spence Young is strictly prohibited.

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