Stena subsidiary Concordia Maritime reported strong charter rates strengthening the MR tanker segment
The company said the product tanker market strengthened significantly in April and May, with market rates at much higher levels than for both Q1 2022 and full year 2021.
Clarkson data states that at the end of May, average spot market earnings for an MR vessel stood at US$36,000 per day. The time charter market has also strengthened and a three-year contract for an MR tanker is currently between US$15,000-18,000 per day, depending on the vessel’s design.
Suezmax average spot earnings currently stand at US$22,000 per day but Concordia reported that volatility in the segment has been high during April and May, occasionally peaking at over US$60,000 per day.
A key reason for the strong product market is the war in Ukraine which has brought two significant changes – the first in trading patterns and the second, the high demand for oil – a result of sanctions and the resumption of demand following the global pandemic.
This applies particularly to European diesel imports, which are now increasingly coming from the Middle East, Asia and North America. Concordia believes increased European imports from more distant producers are likely to continue.
The operator noted that rates vary greatly depending on the type of vessel and the routes taken, but overall believes the phasing out of Russian oil has resulted in “longer transport distances and increased transport efficiency.” At the same time, other oil producers have not quite made up the gap Russian oil leaves in the market.
Changes to the global refining capacity are also responsible and the impact of refinery closures in North America, Europe and elsewhere is beginning to tell. Overall refining capacity has decreased west of the Suez but has increased in Asia and the Middle East, which means longer transport distances and affects the whole of the tanker market.
Meanwhile, the IEA expects global oil demand to grow by 3.6M barrels per day from April to August 2022. A main factor is increased demand in China (which imposed severe lockdowns following a Covid-19 outbreak in /April), the US driving season and a continued recovery in aviation fuel demand.
Concordia chief executive Erik Lewenhaupt said he remains “cautiously optimistic” on the product tanker market’s prospects for the remainder of Q2 and the rest of 2022.
The company’s product fleet is employed on five-year charters to Stena Bulk, at a base rate of US$15,500 per day. There is also the possibility of profit-sharing for freight exceeding the base rate, calculated on the basis of average earnings per vessel per half-year. Stena Bulk employs the vessels on a mix of short and medium-term contracts in both Asia and the Atlantic.
