Product Tankers: Less Cargo, Higher Earnings
A market paradox seems to be forming in the product tanker market. In its latest weekly report, shipbroker Xclusiv said that “the product tanker market has experienced an extraordinary freight rally between early August…
The shipbroker added that “the MR market has followed a similar upward trajectory, although geographical differences remain considerable. South Korea–Singapore (TC11) earnings increased by 261% to USD 64,144/day, while West Coast India–Japan (TC12) climbed 280% to USD 50,642/day. Singapore–Australia (TC7) strengthened by 188% to USD 67,775/day. Conversely, the Atlantic market experienced a less pronounced recovery, with US Gulf–UK Continent (TC14) increasing by just 35%, illustrating the stronger momentum across Eastern Hemisphere trades”.
Meanwhile, according to Xclusiv, “a particularly important development is the changing employment pattern of larger product-capable tankers. During the examined period, Aframaxes engaged in crude trading increased by 20.3% year-on-year to 858 vessels, while crude-trading Panamaxes rose 18.6% to 134 units. Conversely, clean-trading LR2 participation declined by 39.2% to 158 vessels, while LR1 participation fell 9.6% to 208 units. With crude tanker earnings reaching exceptionally elevated levels, owners have increasingly found dirty trading more attractive, effectively withdrawing substantial capacity from the clean market. Importantly, returning these vessels to refined product transportation requires tank cleaning, preparation and additional time, preventing an immediate supply response”.
“Looking ahead, geopolitical developments could further support this imbalance. The recent US–Russia agreement facilitating Russian diesel shipments, alongside Washington’s temporary sanctions relief, could generate additional product tanker employment and reshape trading routes. However, the actual increase in shipments remains uncertain. Should additional cargo demand materialise while LR vessels continue favouring lucrative crude employment, clean tanker availability could tighten further. Consequently, freight earnings may remain elevated despite declining overall trade volumes, with vessel deployment and geopolitical developments increasingly determining the market’s direction”, Xclusiv concluded. Nikos Roussanoglou, Hellenic Shipping News Worldwide
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