TANKERS: Americas Aframax rates split as longer-haul voyages offer higher returns

New York — The Americas Aframax market saw an uncommon split between local and inter-regional segments develop the week started March 1, with freight for the longer US Gulf Coast-Transatlantic route slipping 20% from Feb. 25, and freight for shorter local voyages remaining at nine-month highs, as shipowners struggled to lock in as many days employment for their ships as possible while rates remained high.

Freight for the 70,000 mt USGC-UK Continent tumbled from a peak of w125 the week started March 1, to be assessed at w100, or $17/mt on March 3, after Vitol placed the Bergen TS on subjects for that route at w100 on March 3. Previously, Exxon had booked the Dubai Horizon at w107.5 and BP had booked the Gagarin Prospect at w110.

Yet freight for local Caribbean and East Coast Mexico-upcoast routes remained at highs not seen since May 2020 on a $/mt basis, to be assessed at w155, or $7.24/mt on March 3, up from a February low of w72.5 or $3.39/mt.

An Aframax USGC-UKC voyage will typically take around 16 days travelling at a speed of 13 knots, whereas an ECMexico-USGC voyage will take roughly 2 days at the same speed.

Owners lock in rates

"Owners want to lock in a long haul in anticipation of lower rates ahead," a shipbroker said, while long-haul Aframax voyage returns were at around $30,000/d on March 3, higher than returns on local voyages, in spite of the higher Worldscale rates, according to sources.

"Everyone knows this market level won't last much longer, so [shipowners] prefer to go trans-Atlantic and lock in the current rate for longer (more return) instead of going on local/short voyages. So, there's a lot of competition for trans-Atlantic, charterers need a premium to talk owners into local business," a second shipbroker said.

Looking forward into the week ahead, market participants were at odds on the timing of a looming market rate correction for Caribbean/ECMexico-USGC freight, as both fog in USGC ports and a long backlog of ships cleared up, and as a low trans-Atlantic rate balances out local freight.

"There is an equilibrium point....at a certain TA freight level, the short ECMexico-USGC route starts to make more sense, and they balance each other out," a shipowner said, adding that the timing of the correction would depend on overall volumes on both the local and trans-Atlantic routes, as well as on the number of ballasters attracted from Europe.

"If ballasters put pressure on TA, the rate will drop further and owner interest in ECMexico arises," he said.