Yet another signal on the Panama Canal situation is flashing red: Spot rates are surging for product carriers — specialized tankers carrying diesel, gasoline, and jet fuel — that transit the waterway, reports Freight Waves.
Transit delays squeeze tanker supply
Looking back at Argus’ historical data, there is no precedent on these routes for the run-up in rates during November. In past years, rates have increased only moderately, or decreased, during this month.
“The transit delays are squeezing tanker supply available in the Gulf by slowing their return to the Atlantic Basin,” explained Watt. With about a third of U.S. refined products exports reaching Latin America’s Pacific coast — Chile, Peru, Ecuador, and Mexico’s west coast — that’s a significant number of tankers being held up on the way back.
Vessel-tracking data from MarineTraffic showed 20 product tankers waiting at the Pacific entrance to the canal on Thursday.
“Vessels without booked transit slots are waiting up to four weeks to transit the canal’s lock system. Tanker operators are charging premiums to carry cargoes across the Panama Canal because they know they’ll have to either wait in line or secure a transit slot on the return journey,” Watt said, noting that a transit slot for an MR product tanker can cost as much as $1 million.
Tanker ‘migration’ factors
The cure for high prices is high prices. The historic rates being achieved by MRs in the U.S. Gulf-to-west coast route should attract more tankers, bringing rates off their peak.
“Looking ahead, the canal delays are likely to continue well into next year, but U.S. Gulf Coast rates may retreat as tanker operators ballast across the Atlantic from Europe to capitalize on the high-earning journeys in the U.S. Gulf,” said Watt.
On the other hand, the Atlantic Basin vessel supply is usually “balanced” by-product tankers migrating from the Pacific Basin. The Panama Canal crisis may stymie this option.
Rates for MRs in the Pacific Basin are much lower than in the Atlantic. According to Clarkson Securities analyst Frode Mørkedal, “The sustained strength [in MR rates] is primarily due to market tightness in the Atlantic region. The Pacific market tells a different story, with rates significantly lagging.
“A key factor contributing to the subdued Pacific market compared to last year is the reduced volume of Chinese exports, a consequence of the absence of additional export quotas.
“Although there is a significant difference in earnings between the Atlantic and the Pacific, the Panama Canal disruptions make it harder for vessels to ballast from Asia to the U.S.,” said Mørkedal.
Vortexa analyst Mary Melton made the same point in a market commentary on Nov. 24. “Panama Canal congestion could create global fleet distribution rigidity” and “uncertainty for MRs migrating to the Atlantic Basin,” she wrote.
“Moving forward, fleet inflexibility looks likely, as repositioning and migration may be more difficult.”
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Source: Freight Waves
