Ready For A Rebound?

Sep 6th 2024:What are the prospects for clean Aframaxes? As we discussed in one of our Weekly Opinions last month (“Do You Want Coatings With That”), many shipowners that are interested in the Aframax tanker segment are choosing to build coated tankers (LR2s) to maintain the optionality to trade dirty or clean. In the first half of 2024, clean Aframax rates were very strong, albeit quite volatile. However, over the summer, rates for LR2s have fallen precipitously. In this week’s Tanker Opinion, we will delve deeper into the reasons LR2 rates were so strong in recent years, why they have come off and what might be in store for the future for this segment. LR2 tankers are typically used for the long-haul transportation of refined products. Their size gives them a competitive advantage relative to LR1s and particularly MRs. The two key commodities transported on LR2s are diesel/gasoil (40% of the total since 2021 and naphtha, 37%). Gasoline is a distant third with 12% of the total, followed by jet fuel/kerosine. Saudi Arabia and India are traditionally the largest exporters of diesel on LR2s. Combined, they account for almost 50% of the diesel/gasoil trade on LR2s since 2021. The UAE, South Korea, Taiwan and Kuwait are also meaningful exporters of diesel/gasoil on LR2s. The second largest product moved on LR2s is naphtha. Main exporters are the UAE, Qatar, Russia, Algeria and Kuwait. The naphtha is primarily destined for the petrochemical industry in countries in the Far East (South Korea, Japan, China, Taiwan and Singapore are the top 5). Given the geographical distribution of both the exporters and the importers, it is no surprise that moving 75,000 Metric Tons (MT) of naphtha on the Arabian Gulf to the Far East route is the benchmark route for LR2 tankers (TC1 on the Baltic Exchange). Please fill in below form to continue read.