Medium range product tankers faced with increasing complexities in attempt to increase earnings

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

20 Nov 2010

Medium range tankers have been in a dismal situation since the second half of the previous year, with the situation not much altered during most of this year as well, but things could pick up in the future, albeit only for those ship owners who keep their eyes and ears open. According to a report from London-based shipbroker Gibson, the second half of last year was an absolute disaster for MR tankers operating in the Atlantic Basin. “Timecharter equivalent earnings on a round voyage basis for the benchmark gasoline trade UKC - USAC (TC2, 37,000 tons) averaged well below fixed operating costs at $2,500/day between July and November 2009. The situation this autumn has not been much different, despite initial strong hopes for a busy hurricane season. Since early August TC2 daily returns have remained below the very basic “break-even” mark in
terms of fixed operating expenses, with the latest TCEs at just $500/day”.
The broker said that in part, such weak earnings are caused by a renewed weakness in US gasolinge imports, which over the past couple of months have averaged 0.84 million b/d, the lowest level for this time of year since 2003 and slightly below last year’s level. Another important downwards factor is undoubtedly rising MR supply, with the total fleet figure (25,000 to 55,000 dwt) at present some 4% higher than a year ago.
Still, ray of hopes can be found in the strong gains in US product exports and mainly in distillates. Exports of distillates increased from just over 0.1 million b/d in 2004 to 0.59 million b/d in 2009, with volumes for the first eight months of this year being fairly close to last year’s shipments at 0.6 million b/d. “As a result, distillates became the single largest US products export, with almost all of it traded to Latin America/Caribs and transatlantic to Europe. Strong product exports provided opportunities to MRs operating in the Atlantic Basin to increase spot
earnings by triangulation and/or picking up backhaul cargoes back into Europe. In fact, the actual returns on a voyage whereby an owner secures a cargo from the US Gulf to the UK Continent (right after completing the TC2 voyage) are on average 2-3 times higher than the simple round voyage TCE calculations on the UKC/USAC route” said the report.
Even so, according to Gibson not all of the tankers operating in the region were able to secure these deals, something which comes to show that transatlantic MR trades are characterized by increasing complexities, but at the same time offer more opportunities than ever before to enhance tanker returns.
Meanwhile, according to Fearnley’s weekly report, product trades remained sluggish this week as well, impaired by an abundance of prompt tonnage on the Continent. “Freight rates remain flat at ws125 basis 37k m/t for UKC/USAC. Despite a number of recent LR1 fixtures from the Continent going east, the tonnage list remains long with LR1s trading Baltic/ States fixing ws120 basis 60k m/t. Activity for the Handies trading cross NWEurope have picked up this week but rates remain flat at ws177.5 basis 22k m/t. There were few changes to report in the Caribs with rates at ws135 basis 38k m/t upcoast and ws100 basis the same quantity on backhauls to Europe. During the last week, the clean market east of Suez has experienced an unanticipated rally in freight rates. For LR1s trading MEG/Japan fixtures have been reported on subjects at ws137.5 basis 55k m/t, representing a TCE of around usd 9.750/day. For the LR2s trading on the same route, fixtures are reported on subjects with rates up to ws135 basis 75k m/t, representing a TCE of around usd 17k/day on a roundtrip basis without waiting time. Jet fuel liftings MEG/UKC are paying around usd 1.8 milllion basis 65k m/t. MRs trading Singapore/Japan are seeing rates at ws140 basis 30k m/t, and MRs trading MEG/Japan around ws142.5 basis 35k m/t” concluded Fearnley’s.

Nikos Roussanoglou, Hellenic Shipping News Worldwide