Suezmax’s share in Russia trades increases over Aframaxes as the mainstream market weakens while Supertankers cleaning up reach a record-high in July, the trend will likely subside reports Breakwave Advisors.
Suezmax Share Increases
Aframax – Suezmax spread for the Russian trade has dropped to its lowest levels since the Russian invasion in Ukraine (Argus) Despite a 4th consecutive m-o-m drop in overall Russian crude voyages for July, Suezmax tankers managed to increase their share at the expense of Aframaxes.
- Share of Suezmaxes has increased by 12% in the span of two months (May to July)
There are two factors at play for this development:
- The continuous shrinking of the fleet carrying Russian crude, which predominantly consists of Aframaxes leads to optimizing the available fleet to satisfy current trade requirements
- A weakening of the current mainstream Suezmax market (rates currently at 2024-lows) likely has attracted vessels to the Russian trades
- These vessels predominantly operate
Supertankers Cleaning Up
July noted 11 Suezmaxes and 4 VLCCs clean up (not on their maiden voyage). This has been a more profitable solution for traders due to the volatile LR2 rates for East-to-West flows due to the Red Sea attacks.
- This brings the total number of Suezmax and VLCC tankers that have carried CPP cargo in 2024 to 26
The entrance of these supertankers for East-to-West flows has in turn displaced LR2s which are forced to look eastwards for employment.
- Share of LR voyages commencing in East of Suez and heading to the Pacific has increased from 72% to 84% in three months, pressuring MR rates in the Pacific, but reducing competition for MRs in the Atlantic
The trend, however, will likely subside going forward:
- No additional VLCCs – Suezmaxes have loaded in the first week of August
- There are no indications of new vessels cleaning up via fixture data
- LR2 East-to-West freight rates have almost halved since May, making the segment more financially attractive to traders
Voyage Count Remains High
Suezmax tonne-mile demand has been falling steadily since May, though it still remains above seasonal levels.
- Declines have come from a reduction in voyages originating from South Americas East Coast, Middle East as well as West Africa, as more crude is consumed within WAf due to the start-up of the Dangote refinery and India’s imports of Middle East crudes are subdued
However, Suezmax voyage counts are well above seasonal highs, coming from an increase in Suezmax employment in the Russian trade as well as a surge in voyages out of the US Gulf.
- Some momentum may be gathering in the Atlantic Basin, which could support demand moving forwards July saw a large increase in tonne-miles from US Gulf to Europe, as crude exports to Europe remain high amid flagging Asian demand for US crude
- Recent fixing of VLCCs Brazil-to-Europe will likely be capped by falling Suezmax rates, which could entice charterers to fix on Suezmaxes instead
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Source: Breakwaveadvisors
