Long Range Tanker Market on Rebound

There has been a significant change in fortunes for struggling long range (LR) tankers in recent months, according to UK-based shipbroker and consultant Gibson.

The second quarter figures indicate a switch from the first half’s spot earnings of USD 11,000/day, in which both LR2 and LR1 earnings in the East averaged in October at the highest level since early 2009.

The current level earnings around USD 34,000/day for LR2s and USD 25,500/day for LR1s on the benchmark trade still represent a superb return despite somewhat softened levels, Gibson said in its weekly tanker report.

Significant increases in long haul product tanker demand comes on the back of expanding refining capacity in the Middle East.

Gibson believes that the start-up of modern and large scale refining capacity in the Middle East will support major increases in the long haul products trade, while at the same time it will create additional pressure on the aging refining system in Europe and in some countries in the Asia Pacific.

Apart from stronger demand in the East, LRs are also benefiting from more trade in the West, although the focus has been mainly on LR1s, Gibson data shows.

The shipbroker said that the biggest development over the past couple of years has been a dramatic increase in LR1 shipments from the UK Continent to West Africa: “this trade has grown from virtually nothing a few years ago to regular two/three 60,000 tonne cpp cargoes every week.”

“At the same time, we have also seen an increase in LR1 and LR2 naphtha shipments from the UK Continent or Mediterranean to the East, yet this trade is predominantly arbitrage driven,” Gibson noted.

Finally, there also has been an increase in LR1 trade from the US Gulf to the UK Continent, East and South/Latin America.

“As long as US refinery margins remain strong there is a potential for further increase in US products exports and with it further increases in clean tanker demand,” the report added.

Source: Gibson