VLCCs and suezmaxes just will not stay out of product trades.
Product tanker earnings continued their tepid performance on Wednesday, with Clarksons reporting all asset classes dropping on average week on week.
The culprit?
“The recent drop in product tanker earnings can be partially attributed to crude tankers entering the clean petroleum trade,” Clarksons analyst Frode Morkedal said.
“VLCCs and suezmax vessels currently trading clean account for approximately 3% of dwt capacity but are likely to account for nearly 6% in tonne-mile terms, as many of these ships operate on routes around Africa.
“Once crude tanker rates improve over the winter, less competition from crude tankers could significantly boost LR2 rates.”
The shipbroker said eco LR2 rates dropped to an average of $28,200 per day, down 3.6% from last week, while eco LR1 lost 10% over the same period, falling to $21,100 per day.
Eco MR rates dropped the most, losing 34% week on week to $19,800 per day.
Norwegian broker Steem1960 found in August that the share of uncoated tankers carrying petroleum products in July and August hit about 65m tonnes, or 15% of cargoes — the highest share in the shipbrokers’ records.
It said the effect was particularly pronounced for LR2s and that VLCCs dropping into product trades was particularly troublesome, as they can carry as much as a standard product tanker plus a handysize tanker.
Kpler said VLCCs and suezmaxes in product trades was the dominant narrative in the market over the summer as prominent owners such as Frontline and Okeanis Eco Tankers cleaned up their larger tankers for clean trading.
Those vessels vacuumed up an estimated 10% of all clean tanker tonne-miles, the trade analytics firm said.
Morkedal himself argued in September that LR2 rates would have earned $55,000 per day in the third quarter without crude tanker competition, compared with the $38,000 per day they actually earned.
All three said the phenomenon would start to unwind as the northern hemisphere’s colder months bring on stronger crude tanker rates.
But VLCCs continue to struggle, with Clarksons assessing average rates at $42,000 per day, largely flat from Tuesday but a 16% drop from a week ago.
Suezmaxes averaged $40,100 per day, flat from both Tuesday and last week.
