- Crude and product tanker markets have faced low rates in Q4, with declining demand across most segments except for clean West routes.
- A slowing Chinese economy and reduced Russian crude and product exports have significantly impacted global tonne miles and earnings.
- Seasonal refinery maintenance, OPEC+ production cuts, and dirty-to-clean switching are contributing to weaker rates, indicating fundamental shifts in the market.
The crude and product tanker markets encountered considerable pressure in Q4 2024, with earnings failing to meet expectations in a traditionally strong period. Persistent low rates and structural challenges, including reduced exports from Russia and weaker demand from China, report Gibson, underline a shift in market dynamics.
Aframax Market Faces Declining Tonne Miles
Global tonne miles for Aframaxes fell 2.5% year-on-year, despite US and TMX pipeline increases.
Major declines stem from reduced Russian exports, aging Asian production, and outages in Libya and the Caspian region.
Suezmax: Flat Year-on-Year Trends
Due to VLCC preference, Suezmax demand held steady but saw reduced tonne miles from the Middle East.
Increases from the US Gulf and Latin America offset the sharp Russian exports decline.
VLCCs Show Modest Gains
Tonne miles for VLCCs increased slightly, driven by Latin American exports and some gains in UKC shipments earlier in the year.
Declines from West Africa/US Gulf and lower Chinese demand tempered overall growth.
Clean Tanker Market: Mixed Performance
LR2 demand surged early in 2024, driven by Cape diversions and Westward trade, but later faced pressure from dirty-to-clean switching.
MR and Handy segments suffered due to lower exports from Europe and regional trade reductions in Asia.
Chinese Economy Affects Global Demand
China’s sluggish economy weighed on both crude and clean tanker tonne miles, with trade flows facing a structural reset.
Reduced imports and processing have had long-term implications on tanker routes.
Russian Exports: A Major Blow
Both crude and clean exports from Russia declined due to geopolitical issues, OPEC+ strategies, and economic challenges.
Drone attacks and seasonal production cuts further hindered refinery operations.
Seasonal Refinery Maintenance Adds Pressure
Heavy maintenance schedules in Europe reduced clean product exports, particularly affecting Handies and MRs.
Seasonal trends exacerbated existing weaknesses in demand.
Dirty-to-Clean Switching Trends
Dirty-to-clean switching, while beneficial initially, recalibrated freight markets and hurt LR and MR demand.
This structural trend may continue if crude market conditions remain weak.
Regional Highlights: Med, USG, and North Sea
Med markets showed growth due to Turkish strait delays, lifting Suezmax and Aframax rates.
US Gulf rates remained steady for Aframaxes but faced subdued demand across VLCC and Suezmax segments.
North Sea Aframaxes gained traction amidst poor weather conditions affecting vessel itineraries.
Structural Market Shifts to Watch
Persistent low rates, combined with geopolitical and economic factors, signal fundamental shifts in the tanker market.
While seasonality offers short-term relief, returning to recent demand peaks seems unlikely without significant economic recovery.
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Source: Gibson
