Feature: Chemical tankers outperform MRs into stronger Q4: Ardmore Shipping

Bouncing back from a weak third quarter, chemical tankers are expected to outperform clean product tankers in the fourth quarter and beyond, supported by increasing global gross domestic product and a bullish demand outlook for seaborne chemical tanker trade.

Chemical tankers in the Ardmore fleet are currently seeing $2,000-$3,000 higher time charter equivalent (TCE) earnings than Medium Range tankers, with recent MR voyages fixed with TCEs reported at $15,300/d versus $17,400/d on chemical tankers, Anthony Gurnee, Ardmore Shipping CEO, said in the company's third quarter earnings call Nov. 10.

Given that refined product tankers are more subject to forces of the oil market, Gurnee expected chemical tankers would run ahead of MRs for a while. Gurnee also said that MRs that previously crossed over into the chemical trade could switch back to the clean product market as freight on those routes increase toward the end of the year, which could further tighten the global chemical tanker supply.

One factor linked to strengthening on the chemical tanker market is the 5.5% increase in global GDP in 2021, with chemical tanker trade historically highly correlated with global GDP, Ardmore said. Additionally, port congestion and regional imbalances have added upward pressure for chemical tankers.

Looking forward, ongoing global economic recovery and petrochemical production expansion could propel the chemical tanker market. The expansion edible oil exports, which make up 35% of chemical tanker demand, Ardmore said, was forecast to increase by 4% in 2022 by the third quarter MSI Chemical Tanker Report. Ardmore expected chemical tanker demand to grow 4% every year through to 2025.

Clean tanker outlook supported by oil demand, shifting refining landscape

For product tankers, the projected oil demand recovery of 3.2 million b/d from end-August to end-December brings demand close to end-2019 levels, Ardmore's earnings presentation showed. Low product inventories, particularly in the Atlantic Basin, have increased cargo movements for the winter months.

Quarter-to-date TCEs for Ardmore MRs stood at $10,450/d, Ardmore's earnings release showed, compared to the average $10,280/d reported in the third quarter and the slightly higher $11,300 reported in the second quarter.

MR US Gulf Coast-loading freight has rallied in the first half of November, pushed by increased exports from the US and heightened bunker fuel prices in the Americas. On the short-haul USGC-Caribbean voyage, the November month-to-date average of $611,250 stands 61.87% higher than October's $377,619 average price. The 38,000 mt USGC-Brazil route has seen a 48.12% increase so far in November at w179.69 versus October's w121.31 average, according to S&P Global Platts data.

The USGC-Caribbean route was last assessed at lump sum $625,000, unchanged Nov. 10, while the MR USGC-Brazil route decreased Worldscale 2.5 on the day to settle at w182.5, or $32.63/mt.

Increasing ton-mile demand from refinery dislocations is expected support clean freight in the coming years, with seaborne volumes of refined products expected to surpass the current 21 million b/d, Ardmore said. Refinery closures in the US, Europe, Japan and Australia amount to 5.1 million b/d from 2021-2025, while capacity is expected to grow by 9.7 million b/d in Asia and the Middle East.