Fairplay: LR Rate Surge Explained

“Growing Asian petrochemical production explains why LR2 and LR1 tankers are at 2012 highs, tanker consultancy Poten & Partners said in a note issued today. . .  ‘The numbers of Gulf/East naphtha fixtures on LR1s increased almost 40% from July to October, helping to significantly reduce available tonnage and strengthen freight rates. These movements have brought naphtha demand and pricing in-line with levels that are supported by underlying refinery and petrochemical facility economics. Improved indicators for Asian industrial production should also improve this calculus and in turn benefit the LR1 market in the long-run – assuming an unreasonable extrapolation of current spot rates does not lead owners to instinctively jump back into the market for newbuilds – preventing the types of plummeting rates seen a year ago.”