24-11-2017

MR Segment Remains Bright Spot in Tanker Market

The Asian MR segment is holding firm in all three key regions (AG/WCI, Singapore and North Asia). Rates in all regions have been creeping up steadily since the start of November as cargo demand outpaced vessel supply, tightening position lists in the region. In the AG/WCI market, robust demand to move naphtha cargoes East as well as CPP cargoes to East Africa pushed rates for the key AG/ Japan route to their highest this year at w180. Unquenchable demand for naphtha in Asia has led to naphtha cracks hitting a near twoyear high last Monday on the back of unattractive LPG prices as well as steam crackers running at maximum utilization rates.

Tender data indicates that Tanzania and Kenya are importing around 917 kt of diesel, jet/kero and gasoline in November, up by 8.3% m-o-m. The unusual strength in MR rates is likely to prompt a switchover to their larger sisters- LR2 and LR1 rates for an AG/Japan trip are currently lower by $8.58/T and $7.56/T respectively. Higher gasoline imports into Indonesia as well as mixed aromatics cargoes into China have tightened the position list in Singapore, leaving less tonnage available for ballasting over to the AG/WCI region.

Rates for a Singapore/Australia trip basis 30kt and Singapore/Japan voyage basis 30kt have surged by w37.5 points and w20 points respectively since the start of the month. Pertamina recently turned to the spot market to fill its supply gap due to planned maintenance at its TPPI splitter in November. As such, Pertamina tendered for at least 1.5 mmb of 92RON gasoline for November delivery. Firm demand for long-haul shipments such as North Asia/Australia and North Asia/US-Mexico has boosted the MR segment up in the North.

Around 660 kt of CPP from North Asia has been booked so far to move to the US and Latin America for November loading, up from 435 kt in October. Mexico has been importing increased volumes of diesel ahead of market liberalization reforms next year. As such, MR rates in North Asia have jumped with rates for a South Korea/USWC voyage basis 40 kt up by $250,000 to $1.25 million since the start of the month. Rates for a South Korea/Singapore run basis 40 kt grew by $70,000 over the same period to $470,000. The recent release of a new batch of Chinese export quotas (5 mmt) is expected to keep cargo flows steady, lending support to MR rates for the rest of Q4.

Source: OFE Insights

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