12-07-2017

Med-Japan LR2 freight rate at four-month high on tight vessel availability

LRT

The lump sum freight rate in the clean Long Range tanker market for the Mediterranean to Japan route, basis 80,000 mt, has hit a four-month high on tight availability of vessels, sources said.

LR tankers have seen increased interest from charterers recently, particularly since the beginning of July, amid hefty demand for co-loadings.

“The LR2s have been strong lately in the West [of Suez]. Charterers have been trying to combine MR and Handy cargoes and there is increased demand for LR1s” a broker said.

The release of the Primorsk diesel program for July saw three LR2s chartered by Vitol for 30,000 mt cargoes of ultra-low-sulfur diesel from Primorsk to UK Continent.

The Mediterranean-Japan LR2 route was assessed up $50,000 Monday at a $1.8 million lump sum, the highest since March 14, S&P Global Platts data showed.

The strength of the LR2 market has left no vessels available to meet open cargo demand, including for shipments to Asia.

“The next ships available are the ones doing Baltic to UK Continent runs with options to go to the Med. So, they may not even be back on the UK Continent for three weeks” a second broker said.

The BW Amazon remained one of the few vessels available at the prompt, followed by the BW Tagus, next available on July 26.

The Minerva Aries was said by sources on Monday to be on subjects to Trafigura for a lump sum of $2 million loading naphtha in Tuapse on a late July laycan and discharging in Japan.

Loading an LR2 in Tuapse for a trip to Japan typically requires a $200,000 premium over the Mediterranean, according to broking sources.

Fundamentals in the Asian naphtha market have suffered at the hands of supply despite steady demand from petrochemicals producers.

Naphtha sources said there were few cargoes available in the Mediterranean and freight rates from there to Asia were increasing.

“Vessels are not flowing into the Mediterranean…freights are tight in the Asian market with India [in particular] exporting large volumes” a naphtha trader said.

Rising rates in the LR2 market this could have a knock-on effect for LR1 demand to Asia, sources said. “As rates go up on the LR2s the LR1s become the cheaper option. It is a cycle” a third broker said.

Consequently, the market turns to the Medium Range tanker market to pick up available cargoes when tonnage is tight on the prompt.

Source: Platts 

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