Twin demand factors are lighting the way to an MR tanker recovery, according to French shipbroker Barry Rogliano Salles (BRS).
“So far this year, there have been two shining stars of MR demand, which have helped to support demand in the East and West,” the Paris shop said.
Import requirements from Latin America have been strong, which has seen a rise in exports to the region from the US Gulf.
And, as China has been gripped by Covid-related lockdowns, its refined product exports have surged.
On the negative side, BRS said the pull-back in Russian product exports has hit rates in Northwest Europe, with some of the longer haul diesel imports into the region being carried by LRs rather than MRs.
“In our opinion, the MR2 market remains delicately poised and, in the East, much depends on whether China introduces a refined export ban, which would likely prove catastrophic for regional clean tanker demand,” the broker added.
The company believes western markets should remain supported over the coming months by the start of the driving season in the US and Latin American demand holding firm.
BRS is forecasting average rates for Europe to east coast US trips at $8,050 per day for 2022, on non-scrubber, non-eco tankers.
This is on a par with its forecast from January.
In the LR sector, regional mismatches in refined product supply and demand are boosting rates, the broker said.
A good start
“Generally, the year has started well for clean tankers and the Ukrainian conflict has so far been less of an influence than for crude tankers, which is reflected by largely unchanged clean tanker earnings projections,” BRS added.
With diesel stocks on both sides of the Atlantic now standing at extremely low levels, more diesel has been carried from Asia to the Atlantic basin, the company said.
However, this has so far been more of a “dripping” of cargoes, rather than a flood, BRS argues.
Data continues to point to further stock draws in the Atlantic Basin and the broker anticipates that Russian diesel exports will continue to fall over the coming months.
This could mean the drip could turn into a flood of east to west cargoes.
Negative factors
There are still potential setbacks ahead though.
China could ban gasoil and diesel exports and new VLCCs and suezmaxes could “cannibalise” a significant portion of the clean trade.
“The LR fleet remains delicately poised and we anticipate that in the wake of strong aframax rates, there will remain interest in dirtying up LR2s,” BRS said.
The 2022 rate forecast for a conventional LR2 is $10,900 per day.
This is much less than aframaxes at $21,750, suggesting switching LR2s into dirty trades makes economic sense, despite $600,000 in clean-up costs.
