Naphtha Redemption for LR1s?

After languishing below operating costs for almost six months, LR1 earnings on the benchmark Baltic TC5 route, carrying 55,000 MT of naphtha AG-Japan, have more than doubled during the past two weeks, to above $13,000/day. The LR1 sector has suffered recently from brisk fleet growth, rising by 7.9% during 2011; slowing Asian industrial production growth, limiting petrochemical naphtha demand; competition with MRs for new Indian refinery naphtha production and elusive arbitrages. After collapsing to $1,000/day in October 2011, earnings on the TC5 route recovered slightly, but averaged only $5,200/day for 1q12. This performance has prompted growing disenchantment with the sector, with expectations for 2012 sliding steadily, as demonstrated by the decline in implied TCEs from the TC5 contract for 2q12. Download here