Refined product export activity from the US Gulf Coast to Mexico appeared to have picked up amid record low freight rates this week.
PMI, the trading and chartering arm of Mexico’s state-owned Pemex has booked at least seven Medium Range tankers so far this week to move refined products from the US Gulf Coast to the East Coast of Mexico, according to shipping sources.
Among fixtures heard, PMI has the Torm Arawa, Oriental Diamond and Anja Kirk on subjects for the USGC-East Coast Mexico route at $160,000.
The company was also heard to have fully fixed the Torm Thunder and the Overseas Alcmar at $165,000; the Overseas Alcesmar at $170,00 and the Seasalvia at $175,000.
PMI typically takes an average of about five MR tankers each week to bring product into Mexico from the Gulf Coast, say shipping sources, and gasoline tends to form the bulk of the imports.
At a lump-sum rate of $160,000, freight on the USGC-East Coast Mexico route is the lowest it has been since Platts began assessing the market in September 2015. Shipping sources also say this is likely an all-time low.
The MR market in the Americas has been under downward pressure recently, with rates on a dollar per metric basis at or near record low levels on several routes — particularly stark given that July tends to see a seasonal uptrend in clean tanker freight rates in the region.
The weakness this year has largely been due to limited export activity out of the US Gulf Coast, with key arbitrages shut for much of this year amid ample refined product inventories globally.
“There are a lot of ships around … and there is product everywhere, and the pricing is so narrow, a lot of the arbitrages are not working,” said one shipping source.
The outright price for barges of Gulf Coast conventional gasoline — the main grade exported to Latin American countries — was assessed Thursday at $1.2961/gal, its lowest price since April 7.
The Gulf Coast is still swimming in gasoline, with gasoline stocks last week at 80.24 million barrels, a 8.75% increase from the same period last year, according to Energy Information Administration data.
Gasoline traders have said that while export arbitrages from the Gulf Coast are less attractive than from Asia and Europe, demand from Mexico has been one of the biggest drivers in the USGC spot market.
“Yes, there has been demand from Latin America [this year], but there is no growth,” one shipping source said. “There is so much product everywhere and there is storage infrastructure. So there’s no point moving it. The global economy needs to pick up and it hasn’t yet.”
Apart from wider bearish market fundamentals in the Americas shipping market currently, downward pressure on the USGC-East Coast Mexico freight rate has been particularly acute because of some owners’ preference for the short-haul voyages.
In addition, with frequent discharge delays in Mexico, owners have the opportunity to earn demurrage, which currently stands at about $17,000/day.
“We prefer short-haul [voyages] because at some point, the market has to hit the bottom and we can expect some [additional] earnings from demurrage if the ship goes to East Coast Mexico,” said one shipowner source.
“Besides, as the vegetable oil market from Argentina to India is also bad, there’s no positive side to send ships [on long-haul voyages to] Brazil or Argentina,” he said.
Said a shipbroker: “The America’s market remains oversupplied with rates dragging along at what owners only hope is the bottom.
“With charterers continuing to see multiple offers for the same business, we’ve seen rates to places like Mexico drop even further. It doesn’t look like this cycle will end anytime soon and without a change to market fundamentals.”
Source: PlattsPrevious Next