Aframax tankers may have found some solace in rising employment in the DPP trade to Asia amidst weakness in the wider market reports Breakwave Advisors.
Clean Products
Around 43 supertankers (13 VLCCs and 30 Suezmaxes) switched to carrying clean products in 2024 on the back of a spike in LR East-to-West of Suez freight rates due to the Red Sea attacks.
- Operators switched to crude tankers due to cheaper freight rates being more profitable, even when considering cleaning costs of dirty cargo holds
- Around 2 mn tonnes of CPP per month (predominantly middle distillates) are carried on these tankers, which results in around 22 LR2s, equal to 13% of global LR2 monthly utilization
- As a result, LR freight rates have dropped to half their value since their last spike in April 2024
However, support of LRs for the naphtha flows East and limited availability for LRs in the MEG has once again widened the spread between clean and dirty tankers, suggesting the cleaning-up trend may continue.
Fierce Competition
Competition between vessel classes on the transatlantic route Gulf of Mexico-to-NW Europe is currently fierce.
- Although a trademark Aframax route, Suezmaxes continue to erode Aframax market share, and VLCCs are turning to the shorter route as employment to Asia remains subdued. Suezmax voyage counts on the route have remained high during most of 2024, eating into Aframax market share on the route, especially since June Very high supply-side pressure is keeping Aframax freight rates low, and TD25 is currently hovering at a 12-month low
- This has caused the Aframax and Suezmax TA freight rate spread to narrow to a low not seen since January 2022 (Argus)
- This could spark higher enquiries, and a slight recovery in Aframax employment on the route, as the low rates will likely prove attractive to charterers
However, demand will likely face headwinds as the European refinery maintenance season is underway.
Russian Diesel
Russian diesel has largely remained under the 100 $/b price cap except for three months beginning in early Aug-23.
Because of this, the MR fleet lifting Russian diesel has dipped in and out of the Russian diesel trade based on earnings and demand-side factors, especially after this year’s attacks on Russian refinery infrastructure and seasonal maintenance reduced export volumes.
For all MRs active in the Russian diesel trade, only 26% are ‘established’ in the trade and lift Russian cargoes over 67% of the time.
The majority engage with Russian trade ‘flexibly’, and carry Russian cargoes between 33% and 67% of the time.
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Source: Breakwave Advisors
